BAKU, Azerbaijan, June 13. In its latest update, the US Energy Information Administration (EIA) reported that the average Brent crude oil spot price decreased to $82/b in May, marking an $8/b drop from April, Trend reports.
This decline was initially reflected in daily spot prices, which fell further following the OPEC+ announcement on June 2, closing at $78/b on June 6.
The extension of OPEC+ production cuts through the third quarter of 2024 prompted the EIA to revise down its forecast for OPEC+ oil production for the remainder of the year. As a result, the agency anticipates that reduced OPEC+ output will push Brent prices up to an average of $85/b during the second half of 2024 (2H24). This reduction in production is expected to lead to greater draws from global inventories in 2H24 compared to previous estimates.
Despite forecasting increased inventory draws in the latest outlook, the EIA revised down its annual average Brent price expectation for 2024 compared to the previous outlook. This adjustment reflects a lower starting point due to the recent price decline observed.
Previously, the EIA's May outlook had assumed that OPEC+ would begin relaxing some voluntary production cuts starting in the third quarter of 2024. However, in line with OPEC+'s recent decision, the agency now expects these cuts to continue until the fourth quarter of 2024.
"While crude oil prices initially reacted negatively to the OPEC+ announcement, the extension of all voluntary cuts through 3Q24 is anticipated to contribute to further declines in global oil inventories through 1Q25," the report stated. This continued drawdown is expected to exert upward pressure on oil prices during this period.
The EIA's outlook underscores the complex dynamics influencing global oil markets, with adjustments in production strategies by major oil-producing nations playing a pivotal role in shaping price trends in the coming months.