Brent Crude spot prices are set to average $68.78 per barrel this year, the U.S. Energy Information Administration (EIA) said in its latest monthly outlook, significantly raising its oil price projections for both 2021 and 2022, expecting continued demand recovery.
It should be noted, however, that the Administration completed its forecasts for the July STEO on July 1, that is, just before the OPEC+ spat threw markets into uncertainty over immediate supply, the future of the production deal, and the alliance itself.
According to EIA’s estimates as of July 1, the average spot price of the U.S. benchmark, WTI Crude, will be $65.85/b this year, up from an average of $61.85/b expected last month.
For 2022, the price forecasts were also hiked. Brent spot prices are set to average $66.64/b, up from the previous $60.49 forecast, while the WTI spot price next year is expected to average $62.97/b, up by more than $6/b compared to the June forecast of $56.74/b.
The EIA also noted the narrowing of the Brent-WTI spread, as the increase in WTI prices outpaced the rise in Brent for most of June, resulting in a narrowing of the Brent–WTI spread to as low as $0.61/b on July 1.
“The persistently increasing crude oil prices reflect continuing increases in petroleum demand as the global economy continues to recover from the impacts of COVID-19. The rising prices also reflect ongoing constraints on crude oil supply as crude oil production remains relatively low compared with the more rapid pace of growing demand,” the EIA said.
Next year, global supply growth, from OPEC+ as well as from accelerating U.S. oil production growth, is expected to outpace growth in demand and contribute to average oil prices in 2022 lower than those in 2021, the EIA said in its forecast issued before the UAE-Saudi spat threw global supply forecasts into greater uncertainty.
By Tsvetana Paraskova for Oilprice.com
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