Brent Crude prices are expected to average $68 a barrel in the third quarter this year, the U.S. Energy Information Administration (EIA) said in its latest monthly outlook, raising the forecast by as much as $5 per barrel from the previous projection.
In the June Short-Term Energy Outlook (STEO), the EIA also raised its Brent Crude forecast for June by $4 a barrel from the May STEO and now sees the international benchmark averaging $69 per barrel this month.
Despite the COVID crisis in India, global oil demand remained higher than supply in May, which extended the global inventory drawdown of crude and fuels, although the withdrawal is estimated by the EIA at 1.2 million barrels per day (bpd) last month, compared with average monthly withdrawals of 2.1 million bpd since June 2020.
EIA's latest price outlook is close or slightly below current levels and "incorporates the recent price increases and our forecast of mostly balanced oil markets in the coming months," the administration said.
Global production is set to increase more rapidly in the second half of this year to catch up with rising demand, according to the EIA.
"We expect more significant downward oil price pressures to emerge later in 2021 and into 2022 as forecast global oil supply outpaces slowing oil demand growth," the administration said in the STEO. Related: Oil Prices Fall Following Large Fuel Inventory Build
Rising production from OPEC+, as well as growth in non-OPEC supply, including from the United States, is set to exert downward pressure on oil prices next year when Brent Crude is expected to average $60 per barrel.
Referring to the U.S. oil price and rig counts, the EIA believes the rig count is likely to continue to increase in response to WTI Crude prices rising from less than $50 a barrel in late 2020 to a monthly average of $65 a barrel in May.
"Although U.S. crude oil producers have some incentive to remain cautious about deploying rigs and increasing production because of overall market uncertainty, if WTI crude oil prices remain near $65/b in the coming months, as we forecast, prices will continue to provide an incentive for producers to deploy additional rigs and resume production," the EIA noted.
Onshore U.S. crude oil production in the Lower 48 is set to reach almost 9.3 million bpd by December 2021 - from an estimated 8.9 million bpd in May - with further increases into 2022. Yet, those forecasts are lower than in recent STEOs because of relatively fewer rig deployments at existing price levels, particularly in the Permian, the EIA said.
By Tsvetana Paraskova for Oilprice.com
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