The U.S. Energy Information Administration (EIA) has raised its 2022 Brent spot average price forecast by more than $22 per barrel, the organization’s March Short Term Energy Outlook (STEO) has revealed.
The EIA now projects that the average Brent spot price will be $105.22 per barrel this year, which marks a $22.35 difference compared to its February STEO, which forecasted that the Brent spot price would average $82.87 per barrel in 2022.
In its latest STEO, the EIA highlighted that Brent crude oil spot prices averaged $97 per barrel in February, which the organization outlined was an $11 per barrel increase from January. The EIA noted in the March STEO that daily spot prices for Brent closed at almost $124 per barrel in the first week of March as the further invasion of Ukraine by Russia and subsequent sanctions on Russia, and other actions, created “significant” market uncertainties about the potential for oil supply disruptions.
These events are occurring against a backdrop of low oil inventories and persistent upward oil price pressures, the EIA warned, adding that global oil inventories have fallen steadily since mid-2020. The EIA highlighted that commercial inventories in the OECD ended February at 2.64 billion barrels, which it said is the lowest level since mid-2014.
“We expect the Brent price will average $117 per barrel in March, $116 per barrel in 2Q22, and $102 per barrel in the second half of 2022,” the EIA stated in its March STEO.
“We expect the average price to fall to $89 per barrel in 2023. However, this price forecast is highly uncertain. Actual price outcomes will be dependent on the degree to which existing sanctions imposed on Russia, any potential future sanctions, and independent corporate actions affect Russia’s oil production or the sale of Russia’s oil in the global market,” the EIA added in the STEO.
“In addition, the degree to which other oil producers respond to current oil prices, as well as the effects macroeconomic developments might have on global oil demand, will be important for oil price formation in the coming months,” the EIA continued.
Although the EIA reduced Russia’s oil production in its latest forecast, it still expects that global oil inventories will build at an average rate of 500,000 barrels per day from the second quarter of 2022 through the end of 2023. The organization highlighted that it expects this will put downward pressure on crude oil prices.
“However, if production disruptions – in Russia or elsewhere – are more than we forecast, resulting crude oil prices would be higher than our forecast,” the EIA said in its March STEO.
At the time of writing, the price of Brent crude oil stood at $130.09 per barrel. This time last year, Brent was trading at around $67 per barrel.
