As a result of rising oil prices in December, the U.S. Energy Information Administration has increased its forecast for both Brent and WTI crude oil prices by $2, and now sees Brent prices averaging $53 and WTI averaging $52 per barrel this year.
EIA's January Short-Term Energy Outlook (STEO) forecasts average Brent prices at $56 and average WTI prices at $55 per barrel in 2018.
Still, the oil price forecasts have very broad uncertainty bands, in line with the ranges of values of the contracts for future delivery. Contracts traded during the five-day period ending January 5, for example, suggest that the market expects WTI prices could range from $35 to $93 in December of this year.
EIA's increased forecast in the January STEO, compared to the December STEO, reflects the market reaction to the OPEC deal at the end of November, which pushed average Brent prices trading $9 higher in December compared to the average for November.
The two key factors that could push crude prices up this year would be strong demand and the agreement between OPEC and 11 non-OPEC producers to curtail crude oil supply, according to EIA.
Potential downward pressure on oil prices would come from the expected rise in global output, which would also reduce the potential for significant oil price increases through 2018.
The world's petroleum and other liquid inventory builds are expected to continue, although at a slower pace this year and next, despite OPEC's deal, the EIA said.
The EIA said yesterday that crude oil production in the U.S. this year would average 9 million bpd, or 110,000 bpd more than last year. Prospects for 2018 are also rosy production-wise, with output seen to rise further to 9.3 million barrels daily, with domestic demand averaging 20.22 million bpd in 2018, up by 370,000 bpd from 2017.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More