West Texas Intermediate is expected to average $5 less than Brent for 2015-2016
The Energy Information Administration (EIA) released its Short Term Energy Outlook (STEO) for the month of May, showing prices for both Brent and West Texas Intermediate (WTI) are stronger than in the past. Brent crude averaged $64/bbl in May while WTI averaged $59/bbl, both up $5 from the month before.
Oil prices were pushed higher despite the continued growth of global inventories, which added 2 MMBOPD for the third consecutive month. Signals of higher demand, expectations of lower production from U.S. tight oil plays and growing uncertainty around production in the Middle East and North Africa contributed to the increase.
The EIA forecasts that Brent crude oil prices will average $61/bbl in 2015 and $67/bbl in 2016, $3 less than the agency forecast for 2016 prices in last month’s STEO. WTI prices are expected to average $56/bbl in 2015 and $62/bbl in 2016, maintaining a $5 spread with the international crude benchmark for both years. The EIA said that the lowered forecasts were due in large part to an increase in expected non-OPEC crude oil production growth in 2016, with even greater uncertainty added by the potential of Iran’s production coming back on the market.
Total U.S. crude production averaged 9.6 MMBOPD in May, but is expected to decline through early 2016 before growing again. The EIA forecasts an average of 9.4 MMBOPD of production in the U.S. during 2015 and 9.3 MMBOPD in 2016. The EIA’s production expectations were revised upwards by 0.2 MMBOPD and 0.1 MMBOPD in 2015 and 2016, respectively, from last month’s STEO following revisions to actual production numbers.
