The U.S. Energy Information Administration (EIA) forecasts that global oil production will increase more quickly than demand in 2022, pushing crude oil and petroleum product prices lower than in late 2021. Brent crude oil prices averaged $81 per barrel in November, but they closed the month at $70 per barrel.
In its December Short-Term Energy Outlook (STEO), EIA forecasts Brent crude oil prices will average $70 per barrel in 2022.
Responses to the new COVID-19 Omicron variant could lead to a decline in demand for petroleum products in the near term.
“This is a very complicated environment for the entire energy sector,” said Steve Nalley, EIA acting administrator. “Our forecasts for petroleum and other energy prices, consumption, and production could change significantly as we learn more about how responses to the Omicron variant could affect oil demand and the broader economy.”
The STEO forecast also reports that the release of crude oil reserves by the United States and other countries may have contributed to the decrease in Brent crude oil prices in November, and that decrease could contribute to lower prices in 2022.
Other key takeaways from the latest STEO:
U.S. gasoline prices averaged $3.39 per gallon (gal) in November, the highest monthly average since September 2014. EIA expects retail gasoline prices to average $3.13/gal in December and to average $2.88/gal in 2022. “Our forecast for increased crude oil production suggests some decrease in prices at the pump over the next year,” Nalley said.
EIA forecasts U.S. coal production to reach nearly 621 million short tons in 2022, a 16% increase from 2020. Even with increased production, EIA expects U.S. coal inventories in the electric power sector to decrease by more than 50% from 2020 to 2022. “Demand for coal has grown significantly in the United States and globally this year as coal has become more competitive with natural gas for electricity generation,” Nalley said.
The entire Short-Term Energy Outlook is available on the EIA website.