BAKU, Azerbaijan, Jan. 15
By Leman Zeynalova – Trend:
Given the expectation of inventory builds in 2020 and draws in 2021, the US Energy Information Administration (EIA) forecasts Brent prices will average $65 per barrel (b) in 2020 and $68/b in 2021, Trend reports citing EIA Short-Term Energy Outlook (STEO).
In the first half of 2020, EIA expects global oil prices to be affected by both the downward price pressures of relatively weak oil market balances and by the upward price pressures of geopolitical risk.
This forecast assumes that Brent crude oil prices will decline in early 2020, falling from a January average of $67/b to an average of $62/b in May 2020, as risk premiums slowly fade.
EIA does not forecast supply disruptions, and any physical supply disruptions would likely cause prices to be higher than this forecast. Beginning in mid-2020 and into 2021, EIA expects that tightening market fundamentals will be the main driver of upward price pressures, with forecast Brent prices increasing to $69/b at the end of 2021 and averaging $68/b for the year.
EIA forecasts average West Texas Intermediate (WTI) crude oil prices average about $5.50/b lower than Brent prices in both 2020 and 2021. This price discount is based on the assumption of continued sufficient pipeline capacity from production areas in West Texas and from Cushing, Oklahoma, to refineries and export terminals along the U.S. Gulf Coast.
“Given recent growth in US crude oil production, volumes in excess of Gulf Coast refinery demand are exported, and WTI prices are set by competition with Brent into the marginal export markets in Asia. EIA’s forecast of a $5.50/b price spread between WTI and Brent reflects the additional costs incurred in bringing volumes from Cushing to Asia compared with the costs of shipping from the North Sea to Asia,” reads the report.
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