U.S. Oil Market Forecast Spells Bad News for Producers, Good News for Buyers

Strategic Insights -

The U.S. government's latest oil market forecast indicates a continued decline in the average cost of crude oil imports, with the Energy Information Administration (EIA) lowering its forecast for the year to $12.78/bbl, a decrease of nearly $6/bbl from last year's average. This downward trend is expected to continue, with the average price in the fourth quarter forecasted to reach $14/bbl. Despite production cuts and robust economic growth, Asian oil demand continues to weaken, and U.S. demand growth has been below expectations.

Key Takeaways:

  • The EIA forecasts total U.S. demand for oil to edge up by only 1.2% from 1997 levels to 18.84 million b/d, with imports accounting for 9.13 million b/d.
  • Global consumption is expected to rise by 1.6% to 74.4 million b/d, with global demand in the third quarter forecasted to be 73.6 million b/d.
  • The EIA forecasts average gasoline demand this summer to be less than 2% higher than in 1997, resulting in retail prices for regular gasoline averaging about $1.04/gallon.
  • Commercial stocks in countries making up the Organization for Economic Cooperation and Development are expected to be at 2.8 billion bbl by the end of the year.
  • Natural gas demand is expected to decline by 1.5% this year, with average prices forecast at $2.61/MMBtu, a decrease from $2.76 last year.
  • The EIA predicts industrial gas use to slip 5.1% from year-ago levels, despite a 3.4% increase in industrial output by gas-intensive manufacturing industries.

Statistics:

  • Average cost of crude oil imports: $12.78/bbl (down from $18.60/bbl last year)
  • Total U.S. demand for oil: 18.84 million b/d (up 1.2% from 1997 levels)
  • Global consumption: 74.4 million b/d (up 1.6% from last year)
  • Average gasoline demand this summer: less than 2% higher than in 1997
  • Retail prices for regular gasoline: $1.04/gallon (down from $1.20/gallon last year)
  • Average gas demand this year: 21.65 Tcf (down 1.5% from last year)
  • Average gas prices this year: $2.61/MMBtu (down from $2.76/MMBtu last year)

Sources:

  • Energy Information Administration (EIA) - Short-Term Energy Outlook (July update)
  • Organization for Economic Cooperation and Development (OECD)