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EIA: Crude oil inventories to recede, prices to rise

June 7, 2023
Administration adjusts expectations after OPEC+, Saudia Arabia announce production cuts—but liquid fuel consumption still heading toward record highs in 2023, 2024

The U.S. Energy Information Administration (EIA) this month lowered expectations for global oil production after OPEC+ and Saudi Arabia announced cuts.

OPEC+ says it will extend reductions to crude oil production through 2024, and Saudi Arabia plans to make an additional voluntary cut of 1 million barrels per day in July, prompting EIA to raise its forecasted crude oil prices for the rest of this year and 2024 in its newly released June Short-Term Energy Outlook.

EIA now expects crude oil to average $79 per barrel in the second half of 2023 and $84 per barrel in 2024—an increase of $1 and $9 per barrel, respectively, from last month’s forecasts, the administration reported. Despite the cuts, EIA anticipates overall growth in global oil production this year and next year, led by increased production from non-OPEC countries.

EIA also expects consumption of liquid fuels such as gasoline and jet fuel to establish new record highs in 2023 and 2024, largely driven by non-OECD countries—especially China.

“We expect to see demand for travel continue to increase, which drives our forecast for record consumption of petroleum products,” Joe DeCarolis, EIA administrator, said in a news release. “The petroleum market remains highly uncertain, so we will continue monitoring developments and tracking supply and demand dynamics.”

EIA expects U.S. crude oil production will set annual record highs in 2023 and 2024, though growth in domestic crude oil production is slowing. Slower production growth may reflect a combination of the use of capital to increase dividends and repurchase shares instead of investments in new production; the effects of tighter labor markets and higher costs; and increased pressure on oilfield supply chains, EIA said.

Other highlights from the June STEO include:

  • EIA estimates that U.S. dry natural gas production reached a record average of 104 billion cubic feet per day in April and expects natural gas production to remain just below that level the rest of the year. Natural gas prices at the benchmark Henry Hub are about 70% lower than their peak last year, which is decreasing new gas-only drilling. But associated natural gas production will increase in the Permian Basin in the short term, offsetting decreases in other regions. “Drilling in the Permian Basin typically produces a blend of hydrocarbons that includes crude oil and natural gas,” DeCarolis said. “So as producers increase their crude oil production in the region, we expect natural gas production to increase as well.”
  • EIA expects a 24% increase in electricity produced by solar power this summer compared with last summer. The increase is largely driven by an increase in solar capacity—solar has been the leading source of new electricity generating capacity so far this year.