EIA Monthly Report: Oil prices will fall this year and next due to increased production in the United States and global accumulation

Foreign news on January 10, the US Energy Information Administration (EIA) said on Tuesday that crude oil and refined oil prices are expected to fall in 2023 and 2024, as the rise in crude oil production in the United States and other regions offset the decline in Russian production, which will lead to an increase
in global crude oil inventories.

U.
S.
and non-OPEC producers expect to increase crude oil production by 2.
4 million b/d in 2023 and another 1.
1 million b/d in 2024, while Russian liquid fuel production is expected to decrease by 1.
4 million b/d in 2023 to 9.
5 million b/d in 2023 and another 100,000 b/d to 9.
4 million b/d
in 2024, the agency said in its short-term energy outlook in January.

The U.
S.
is expected to contribute 40 percent of global crude oil production growth in 2023 and 60 percent in 2024, making it the largest source of output growth in its forecast, followed by OPEC
, EIA said.
The EIA noted that U.
S.
crude oil production growth was mainly due to Permian Basin, hydrocarbon, natural gas liquids and biofuel production
.

The EIA raised its 2023 U.
S.
crude production outlook by 70,000 b/d to 12.
41 million b/d, expecting output growth to continue into 2024, bringing U.
S.
crude production to 12.
81 million b/d
.
The January Outlook report is the first to include a forecast for 2024
.

Production from Brazil, Canada, Norway and Guyana (new sources of the global crude oil supply market) is also considered to be the main source
of liquid fuel production growth in 2023 and 2024.
According to the EIA, liquid fuels mainly include crude oil, but also include refinery production growth, hydrocarbon gas liquefied, biofuels and other oils
.

Factors to watch***

However, the EIA said that relatively low capital investment by U.
S.
crude producers could adversely affect U.
S.
production growth, and delays in the start of projects in Brazil, Canada, Norway and Guyana could also hinder crude supply growth, and these uncertainties could undermine its forecast
.

The agency added: "Any OPEC production cuts will tighten the balance, resulting in higher than we predicted
.
" ”

In addition, the EU's ban on Russian crude products, which will take effect on February 5, could be more damaging
than the ban on imports of Russian crude by sea imposed on December 5, EIA said.

"We believe that Russia will be able to change the route
of some crude oil exports affected by EU sanctions.
But we expect that all Russian refined oil exports will not find new destinations due to limited supply of environmentally friendly tankers, which will lead Russia to reduce crude input to refineries and continue to decline its crude oil production," the agency said
in a supplementary document.
The document delves deeper into the price assumptions and the main risks
of their forecasts.

Despite these uncertainties, EIA expects global crude oil production to exceed global crude oil consumption
.

EIA cut its 2023 global crude oil demand forecast by 340,000 b/d to 100.
48 million b/d
.
It expects demand to rise to 102.
2 million b/d in 2024, largely driven by growth in China, India and other non-OECD countries, but not enough to outpace global crude oil production, leading to an increase in global crude inventories over the next two years, which is expected to put downward pressure
on fuel prices.

The supplementary document warns that China will have a significant impact on
the global crude oil balance and prices.

"If the increase in cases causes significant disruptions to economic activity and travel, especially in early 2023, Chinese consumption could be lower than we initially projected
," the EIA said.
"Conversely, if economic growth ends up stronger and more sustained, China's crude oil consumption in 2024 could eventually exceed expectations
.
"

Price drop***

Nevertheless, the EIA forecasts that Brent crude will average $83.
10/b in 2023, down $9.
26 from last month's estimate and 18%
from the 2022 average price of $100.
94/b.

The EIA also lowered its 2023 forecast for WTI crude by $9.
18 to $77.
18/b, down from its 2022 average price estimate of $94.
19
/b.

The agency expects WTI crude to be $71.
57/b in 2024 and Brent at $77.
57/b
.

Lower crude prices, as well as lower refining wholesale margins, are expected to retail gasoline prices to average $3.
32 a gallon this year, 19 cents below previous estimates
.
EIA expects gasoline prices to continue to fall to an average of $3.
09/gallon
in 2024.

In its outlook, the EIA said: "Diesel prices will continue to be higher than gasoline prices
as the market continues to adapt to disruptions mainly related to Russia.
"Russia has been a major supplier of diesel to Europe, and Europe is now importing more diesel
from the Middle East and India.
"

But retail diesel prices are still expected to fall to an average of $4.
22 a gallon this year, down 26 cents from previous estimates, and fall further to an average of $
3.
69 a gallon in 2024.