Decline of oil prices, lower natural gas costs expected by EIA

The US Energy Information Administration’s February short-term energy expectations are indicating a decline of oil pricing over the next two years as well as a 50% drop in natural gas prices. In addition, the production of global liquid fuels is expected to get lower in 2023. Russia and China still stand as sources of uncertainty in EIA’s (short-term energy outlook) forecasts. EIA administrator, said in a statement.

“Global demand for jet fuel has increased as China’s economy has opened up following pandemic lockdowns. Russia’s crude oil exports have largely gone unchanged since the EU instituted a ban on seaborne crude oil imports from Russia. We continue to monitor developments in Russia and China because of their impact on the global energy sector”, the statement added.

The EIA forecast for crude oil says prices will average $83 per barrel in 2023 and $78 per barrel by 2024. That price would be $101 below the average price in 2022. Russia’s oil production and ability to export petroleum products, several non-OPEC countries’ ability to increase oil production, and China’s loosening of COVID-related restrictions could meaningfully affect this oil price outlook according to the EIA.

EIA’s expectation that oil production will outpace consumption is reflected by the continued growth of global oil inventories. According to EIA, global liquid fuels consumption will increase by 1.1 million barrels per day in 2023. Based on the growth, EIA expects an increase of nearly 2 million barrels per day next year.

Oil production in Russia will average 9.9 million barrels per day in 2023, down 1.1 million from 2022. Russian exports have remained higher than EIA expected following the European Union ban of seaborne crude oil from Russia. However, the European Union ban on seaborne petroleum products from Russia that took effect Feb. 5 will disrupt crude oil production, says EIA.

Crude prices eased on Thursday as oil infrastructure escaped serious damage from the earthquake that impacted areas in both Turkey and Syria, while US inventories swelled and investors worried about Fed’s upcoming rate hikes.

Earlier on Thursday, Brent crude settled at $83.86 per barrel the time of writing. WTI crude futures settled at $77.78 down 80 cents at the time of writing, Both benchmarks have gained more than 5% so far this week.

The earthquake, which has killed more than 20,000 people, initially sent oil prices higher on the prospect that the disaster would seriously damage pipelines and other infrastructure and displace crude from the global market for an extended period.

BP Azerbaijan declared force majeure on Azeri crude shipments from the Turkish port of Ceyhan on Tuesday after the quake struck early on Monday. Azeri oil continues to flow there via pipeline, BP Azerbaijan said on Thursday.

A strong US jobs report raised fears that the Fed could continue to aggressively hike rates to cool inflation, pressuring risk assets like oil and equities.

U.S. crude stocks rose last week to 455.1 million barrels, their highest since June 2021, the Energy Information Administration reported on Wednesday, which also pushed oil prices lower. Gasoline and distillate inventories also rose last week, the EIA said, during unseasonably mild winter months.