EIA's Oil Price Target = Wishful Thinking
Posted: Mon Jun 13, 2022 11:05 am
From EIA's Short-Term Energy Outlook dated 6-7-2022
The Brent crude oil spot price averaged $113 per barrel in May. We expect the Brent price will average $108/b in the second half of 2022 (2H22) and then fall to $97/b in 2023. Current oil inventory levels are low, which amplifies the potential for oil price volatility. Actual price outcomes will largely depend on the degree to which existing sanctions imposed on Russia, any potential future sanctions, and independent corporate actions affect Russia’s oil production or the sale of Russia’s oil in the global market.
We forecast Russia’s production of total liquid fuels will decline from 11.3 million b/d in the first quarter of 2022 (1Q22) to 9.3 million b/d in 4Q23. This STEO incorporates the recently announced EU ban of seaborne crude oil and petroleum product imports from Russia. We assume the crude oil import ban will be imposed in six months and the petroleum product import ban in eight months. This forecast does not reflect restrictions on shipping insurance, as details regarding such restrictions were not available when we finalized this forecast on June 2. The possibility that these sanctions or other potential future sanctions reduce Russia’s oil production by more than expected creates upward risks for crude oil prices during the forecast period.
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In my opinion, this is more "wishful thinking" than "reality". Without increasing oil production from Russia, there is close to zero chance that OPEC+ can produce oil close to their increased quotas. The cartel members are not holding back any production and several of the countries are on decline. Per EIA's own weekly estimates, U.S. oil production is only up 100,000 bpd from where it was at the end of 2021 (11.8 million bpd to 11.9 million bpd) despite a significant increase in the active rig count. Why? Because all the "Good DUC's" were completed last year.
BTW Libya's oil production is down a million bpd.
The Brent crude oil spot price averaged $113 per barrel in May. We expect the Brent price will average $108/b in the second half of 2022 (2H22) and then fall to $97/b in 2023. Current oil inventory levels are low, which amplifies the potential for oil price volatility. Actual price outcomes will largely depend on the degree to which existing sanctions imposed on Russia, any potential future sanctions, and independent corporate actions affect Russia’s oil production or the sale of Russia’s oil in the global market.
We forecast Russia’s production of total liquid fuels will decline from 11.3 million b/d in the first quarter of 2022 (1Q22) to 9.3 million b/d in 4Q23. This STEO incorporates the recently announced EU ban of seaborne crude oil and petroleum product imports from Russia. We assume the crude oil import ban will be imposed in six months and the petroleum product import ban in eight months. This forecast does not reflect restrictions on shipping insurance, as details regarding such restrictions were not available when we finalized this forecast on June 2. The possibility that these sanctions or other potential future sanctions reduce Russia’s oil production by more than expected creates upward risks for crude oil prices during the forecast period.
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In my opinion, this is more "wishful thinking" than "reality". Without increasing oil production from Russia, there is close to zero chance that OPEC+ can produce oil close to their increased quotas. The cartel members are not holding back any production and several of the countries are on decline. Per EIA's own weekly estimates, U.S. oil production is only up 100,000 bpd from where it was at the end of 2021 (11.8 million bpd to 11.9 million bpd) despite a significant increase in the active rig count. Why? Because all the "Good DUC's" were completed last year.
BTW Libya's oil production is down a million bpd.