Crude oil prices have been forecasted to fall from 2021 levels on the back of a shift from global petroleum inventory declines during 2021 to inventory increases in the current year and next, the U.S. Energy Information Administration (EIA) said in its Short-Term Energy Outlook (STEO) for January.
According to the document, the price of Brent crude oil, the international pricing benchmark which in the fourth quarter of 2021, averaged $79 per barrel is expected to see an average $75/b in 2022 and $68/b in 2023.
Similarly, EIA monthly data also showed that the U.S. benchmark, WTI Crude, is expected to average $71.32 per barrel this year and $63.50 a barrel next year.
“The declining prices are driven by a shift from global petroleum inventory declines during 2021 to inventory increases in 2022 and 2023. Global petroleum inventories decline when consumption is greater than production and increase when production is greater than consumption,” the monthly report states.
In 2021, global petroleum inventories were drained at a rate of 1.4 million barrels per day (b/d), contributing to higher crude oil prices, it recalled.
However, after the COVID-19 pandemic began in 2020, petroleum consumption returned faster than petroleum production, resulting in this inventory draw.
Noting this, the EIA has anticipated an increase in petroleum production and a slowing of consumption growth in 2022, resulting in an increase in global petroleum inventories.
Read also: Oil climbs to two-month high over falling US inventory
Also, the global petroleum production will increase by 5.5 million b/d in 2022, driven by production increases in the United States, OPEC, and Russia, which together account for 84 percent, or 4.6 million b/d, of the growth, according to the report.
It was also projected that increased tight oil production in the United States and gradually increasing crude oil production from OPEC+ (which includes OPEC members and Russia) will account for most of the increased crude oil production.
While giving a breakdown, the STEO also forecasted that global petroleum consumption will increase by 3.6 million b/d in 2022, driven by more consumption in the United States and China, which together account for 39 percent of the consumption growth.
In addition, global petroleum inventories will increase by 0.5 million b/d in 2022, which will put downward pressure on crude oil prices.
Furthermore, 2023 is expected to witness continued inventory growth, averaging 0.6 million b/d while global petroleum production was projected to increase by 1.8 million b/d in 2023 from 2022, averaging 102.8 million b/d, the EIA analysis showed.
