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EIA Sees Oil Prices Dropping In 2022, 2023

Global inventory builds due to supply growth outpacing demand increases will pressure oil prices down this year and next, the U.S. Energy Information Administration (EIA) said in its Short-Term Energy Outlook (STEO) for January.

Brent Crude prices, which averaged $79 a barrel in the fourth quarter of 2021, are set to average $75 per barrel during 2022 and $68 a barrel in 2023, the EIA said. 

The U.S. benchmark, WTI Crude, is expected to average $71.32 per barrel this year and $63.50 a barrel next year, the EIA said in its monthly outlook.

Early on Wednesday, before EIA’s weekly inventory report, WTI Crude was trading above $82, and Brent Crude was above $84 a barrel, after Fed Chair Jerome Powell said on Tuesday that the U.S. economy would see only a “short-lived” impact from the Omicron surge, and was ready for the beginning of monetary policy tightening.

According to EIA’s estimates, inventory withdrawals globally averaged 1.4 million barrels per day (bpd) last year, thanks to faster demand growth than supply increases. This year, however, demand growth is set to slow while supply will grow faster, leading to builds in global petroleum inventories.

The world’s oil production is set to jump by 5.5 million bpd in 2022, driven by production increases in the United States, OPEC, and Russia, which together will account for 84 percent, or 4.6 million bpd, of the growth, the EIA said.

At the same time, global petroleum consumption will increase by 3.6 million bpd in 2022, the administration noted.

Inventories will build by 500,000 bpd this year, and by an average 600,000 bpd next year, putting downward pressure on oil prices, the EIA says.

The administration’s forecast is markedly different from that of Goldman Sachs, for example, which said last week that oil prices could reach $95 if Iran doesn’t return to the market this year, while commodities overall are set for a supercycle that could potentially last a decade.

Goldman’s call for Brent Crude prices for the first quarter of 2022 is $85 per barrel, assuming that Iran could legitimately return to the market later this year. But an Iranian return now looks increasingly unlikely, and without Iranian exports, we could be looking at $95 oil, according to Jeff Currie, global head of commodities research at Goldman Sachs.


Last month, Goldman Sachs forecast crude oil prices could hit $100 in 2023 as demand growth outpaces supply growth.

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on January 13 2022 said:
    The projection by the US Energy Information Administration (EIA) that oil prices will drop in 2022 and 2023 because of supply growth outpacing demand is an obvious ploy to depress oil prices.

    This begs the question as to where from would oil supply grow when the global oil inventories are now below its normal average, global investments in oil and gas projects are down by 33% from 2019 levels, and persistent question marks about OPEC+’s spare production capacity at a time when global oil demand is headed upwards and is projected to add an estimated 3.6 million barrels a day (mbd) this year.

    The maximum OPEC+ could increase production this year is by 2.0 mbd with an estimated 200,000-300,000 barrels a day (b/d) coming from US shale oil production giving a total oil supply of 2.2-2.3 mbd and leaving a deficit of 1.3-1.4 mbd in 2022.

    Oil prices are on an upward trajectory for the next five years which will see Brent crude rising from $85-$90 a barrel before the end of the year or early 2023 and hitting $110-$120 by 2027.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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