Oil Price Forecast - May 23

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Oil Price Forecast - May 23

Post by dan_s »

Note received this morning from Keith Kohl at "Energy Investor" with my comments in blue.

With this in mind, let’s take a look at the latest news in energy:

Lower Oil Prices Ahead, According to the EIA

The EIA is going to get it wrong — again!

There’s a phrase that always comes to mind when I see the Energy Information Administration put out its oil projections: Forecasts were made to be revised. And later this year, you’re going to see exactly what I mean.

The EIA published its latest Short-Term Energy Outlook this week and has forecast lower crude prices for the second half of 2023 and 2024. According to the EIA’s projections, the price of Brent crude is expected to average $78.65 per barrel in 2023 and $74.47 per barrel in 2024.

Higher-than-expected Russian supply and lower Chinese demand are the primary culprits, despite the surprise OPEC+ announcement that members would decrease output by 1.2 million barrels per day.

I’m not buying this rosy outlook from EIA, and neither should you. For starters, we know that China’s refinery throughput last month was up 19% year over year. But that was to be expected, wasn’t it? Reopening China’s economy after years of being locked down from pandemic restrictions is a major catalyst for demand, which also overlooks the fact that U.S. consumption is strong AND heading into our peak demand season.

But let me show you another reason to be skeptical of the EIA’s latest report…

IEA Thinks Oil Demand Is Heading Higher < BTW IEA has a long history of under-stating global oil demand.

The International Energy Agency seems to be at odds with the EIA.

While the U.S.-based EIA forecast oil demand to rise this year by about 1.7 million barrels per day, the Paris-based IEA sees global demand growing by 2.2 million barrels per day. As a side note, OPEC is also projecting a huge year for oil demand growth and expects global demand to rise by 2.5 million barrels per day year over year. < Demand going from 100 million bpd in Q1 to over 104 million bpd in Q4.

In fact, we saw record demand from China, India, and the Middle East earlier this year, with total world demand averaging 102 million barrels per day.

Now couple this bullish demand outlook with the fact that supply will be constrained in the latter half of 2023 thanks to lower OPEC+ output.

It almost makes one wish they had a massive strategic stockpile somewhere filled to the brim and ready to help…

Biden should be taken to the woodshed.
Dan Steffens
Energy Prospectus Group
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