Global crude inventories will decrease build rate through 2018, EIA predicts

In its recently released Short Term Energy Outlook, the EIA outlined its predictions for global production and consumption through 2018.

An increase in production and seasonal drop in consumption is expected to push an increase in global crude inventories of 2.0 million BPD in the fourth quarter of 2016, the agency said. EIA predicts that production and consumption will both grow through 2018; however production will not grow as rapidly as consumption, tightening global balances.

OPEC’s pre-agreement production increase bumps up 2016

Global Crude Oil Consumption will Increase Faster than Production: EIA

Source: EIA

Global production is expected to increase by 1.6 million BPD during the fourth quarter of 2016. Much of this increase is due to OPEC members increasing production prior to the implementation of the production cut agreed upon in November, the agency said. With 55%, or 0.9 million BPD, of this increase due to OPEC production, inventory build rates are expected to decrease in 2017.

Consumption will outpace production through 2018

EIA predicts that global crude consumption is expected to increase more rapidly than global production through 2018, decreasing global inventory build rates. Global inventories are expected to have increased by an average of 0.9 million BPD in 2016, with an average stock build of 0.3 million BPD in 2017 and 0.1 million BPD in 2018. In the second half of 2018, inventories are expected to decline by an average of 0.1 million BPD. In the third quarter of both 2017 and 2018 EIA expects consumption to exceed demand, creating inventory draws in both periods.

This projected inventory build, along with the quick response to rising prices by U.S. unconventional producers in 2016, is expected to keep WTI prices below $60 per barrel through the end of 2018. EIA expects North Sea Brent prices to average $53 per barrel in 2017, gradually increasing to an average of $56 per barrel in 2018. EIA predicts that WTI will average $1 per barrel less than Brent, with an average price in 2017 of $52 per barrel and $55 per barrel in 2018.

Global Crude Oil Consumption will Increase Faster than Production: EIA

Source: EIA

WTI is down slightly today, dropping by $0.24 to close at $52.94 per barrel.

U.S. crude inventories increased by 2.8 million barrels last week, from 485.5 million barrels to 488.3 million barrels.


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