BAKU, Azerbaijan, July 8
By Leman Zeynalova - Trend:
Global oil demand is expected to exceed supply in the second half of 2020, the US Energy Information Administration (EIA) said in its July Short-term Energy Outlook (STEO), Trend reports.
However, existing inventory levels, significant OPEC surplus production capacity, and uncertainty about the trajectory of oil demand will likely limit upward crude oil price movements, particularly in the third quarter of 2020.
EIA expects Brent crude oil prices to average $41/b during the second half of 2020 and $50/b during 2021, reaching $53/b by the end of 2021. However, this price path reflects global oil consumption of 96.0 million b/d during the second half of 2020 along with relatively strict compliance to announced OPEC+ production cuts, both of which are uncertain, said the EIA.
Also, the degree to which the U.S. shale industry responds to the recent relative strength in oil prices compared with their recent lows in April will affect the oil price path in the coming quarters, reads the report.
Global economic developments and numerous uncertainties surrounding the ongoing COVID-19 pandemic in the coming months could push oil prices higher or lower than the current STEO price forecast. Uncertainty also remains regarding the duration of, and adherence to, the current OPEC+ production cuts. Lastly, the U.S. tight oil sector continues to be dynamic, and the ability of producers to adjust to an especially volatile pricing environment in the face of significant reductions in drilling activity in recent months could affect both current crude oil prices and expectations for future prices.
EIA forecasts West Texas Intermediate (WTI) crude oil prices will average about $3/b less than Brent prices in 2020 and $4/b in 2021. This price discount is based on EIA’s assumption that the current reduced discount of WTI to Brent of $2/b on average in June reflects significant declines in U.S. crude oil production and reduced available volumes of U.S. crude oil for export to distant markets relative to other global benchmarks.
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