July Short Term Energy Outlook: EIA
Note: WTI = West Texas Intermediate crude oil.
In the July Short-Term Energy Outlook (STEO), The EIA forecasts that the Brent crude oil price will average $72 per barrel (b) in the second half of 2021 (2H21) and $67/b in 2022, both $6/b higher than in the June STEO forecast. The EIA revised global production down by 210,000 barrels per day (b/d) in 2H21. This leads to larger forecast inventory draws in 2H21 and smaller forecast inventory builds in 2022. This contributes to the increased price forecast.
In the July STEO, the EIA forecasts the Brent crude oil price will average $73/b in the third quarter of 2021 (3Q21). It will fall to average $71/b in the fourth quarter of 2021 (4Q21). Also in the July STEO, they forecast the Brent crude oil price will fall from an average of $69/b in 2021 (up from $65/b in the June forecast) to $67/b in 2022 (up from $60/b in the June forecast).
The EIA also expects the West Texas Intermediate (WTI) crude oil prices will likely follow a similar path. WTI crude prices are forecast in the July STEO to average $71/b in 3Q21. This is $6/b higher than in the June STEO. The July STEO expects WTI prices to be $68/b in 4Q21, up $7/b from the June forecast.
The Brent crude oil price averaged $73/b in June 2021, up $5/b from May. June was the first month when the Brent price averaged more than $70/b since May 2019. The EIA expects moderate downward oil price pressures will emerge beginning in 2H21, when forecast global oil production will rise, causing inventories to draw at a slower pace. Significantly smaller stock draws in 2H21 compared with 1H21 and stock builds in 2022 will likely put downward pressure on oil prices.
In the July STEO, the forecast implies global stock draws (the difference between consumption and production) of 210,000 b/d in 2H21. This is a significant increase from average stock draws of 20,000 b/d in last month’s forecast. It is still significantly less than the average draws of 1.7 million b/d in 1H21. They expect implied stock builds in 2022 will average 460,000 b/d. This is down from 510,000 b/d in last month’s forecast.
From June to July, the EIA lowers the global petroleum production forecast by nearly 210,000 b/d in 2H21. This drives larger stock draws in the forecast. They also lower their forecast of OPEC production of crude oil. This is the largest driver of the downward revision, by 110,000 b/d in 2H21. For 2022, the EIA make minor, offsetting revisions to U.S. and OPEC production forecast. This results in the global petroleum production forecast remaining at 101.8 million b/d in the July STEO.