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Informist, Wednesday, Jan. 15, 2025

 

MUMBAI – The US Energy Information Administration expects recently rising crude oil prices to decline from mid-2025 onwards through the end of 2026 as growth in global oil production will outpace the growth in oil demand. The unwinding of the Organization of Petroleum Exporting Countries and allies' production cuts and strong growth in oil production outside of OPEC and allies will be the key reasons for the growth in global oil production, the agency said in its Short Term Energy Outlook report for January.

 

However, the agency's forecast does not take into account the additional sanctions issued by the US on Friday targeting Russia's oil sector, which can potentially reduce Russia's oil exports to the global market, it said. "We forecast that the Brent Crude oil price will average $74 per barrel in 2025, 8% less than in 2024, and then continue to fall another 11% to $66 per barrel in 2026," it said.

 

Eight members of OPEC and its allies extended their voluntary production cuts of crude oil till the end of March. This recent extension of the voluntary production cuts could lead to global inventory withdrawals of 500,000 barrels per day in the first quarter of 2025 (Jan-Mar). "We expect that falling global oil inventories will increase crude oil prices $2 per barrel from their December average to an average of $76 per barrel in 1Q25 (Jan-Mar)," the agency said. 

 

Although the agency expects OPEC and allies to increase production from the second quarter of 2025 (Apr-Jun), the cartel will produce less crude oil than stated in its most recent production target in an effort to avoid significant inventory builds, the report said.

 

EIA expects production growth outside of OPEC and allies to continue, though at a slower pace than in 2023 and 2024. The US agency expects growth in oil production in 2025 to be led by countries outside of OPEC and allies, with output seen increasing by 1.6 million barrels per day before slowing to a growth of less than 900,000 barrels per day in 2026. "Although production growth outside of OPEC and allies is expected to still be driven by the US, Canada, Brazil, and Guyana in 2025. Except for Brazil, growth slows for all these countries in 2026," it said.

 

This production growth, coupled with relatively weak growth in oil demand will cause global oil inventories to accumulate from mid-2025 through 2026. The agency sees global inventories increasing by an average of 300,000 barrels per day this year and by 700,000 barrels per day in 2026. "Increasing inventories put downward pressure on prices through the remainder of our forecast. As a result, we expect the average Brent Crude oil price will fall to $72 per barrel in December 2025, before falling to an average of $66 per barrel in 2026," it said.

As for West Texas Intermediate crude on the New York Mercantile Exchange, the US energy agency has raised its estimate for 2025 to $70.31 per barrel from last month's projection of $69.12 per barrel. For 2026, the agency expects West Texas Intermediate crude prices to average $62.46 per barrel.

 

The agency has slightly increased its estimate for US crude oil production for this year to 13.55 million barrels per day from 13.52 million barrels per day projected last month. In 2026, production by the world's biggest oil producer is seen at 13.62 million barrels per day.

 

The agency expects global oil production in 2025 to average 104.36 million barrels per day, higher than the previous estimate of 104.26 million barrels per day. Next year, global output is seen rising to 105.89 million barrels per day.

 

Global consumption of liquid fuels is set to increase by 1.3 million barrels per day in 2025 to 104.10 million barrels per day. In 2026, global oil consumption could rise by 1.1 million barrels per day to 105.15 million barrels per day, driven by consumption growth in non-OPEC countries. "Much of our expected growth is in Asia, where India is now the leading source of global oil demand growth in our forecast," the agency said.

 

EIA expects China's petroleum and liquid fuels consumption to grow by 200,000 barrels per day in both 2025 and 2026, as economic stimulus efforts are expected to drive higher demand growth in the country.

 

The agency has kept the forecast for oil consumption in India in 2024 at 5.49 million barrels per day, unchanged from last month. The projection for oil consumption in India in 2025 has been reduced to 5.80 million barrels per day from 5.82 million barrels per day forecast in December. The agency projects oil consumption in India to reach 6.09 million barrels per day in 2026.

 

According to the agency, the top crude oil-consuming nation is the US at 20.33 million barrels per day, followed by China at 16.27 million barrels per day, India at 5.49 million barrels per day, Russia at 3.89 million barrels per day, Brazil at 3.26 million barrels per day, and Japan at 3.17 million barrels per day.

 

Commercial crude oil stocks available with the OPEC countries remained steady at 2.77 billion barrels, according to the report.

 

At 1152 IST, the price of Brent Crude on the Intercontinental Exchange was $80.17 per barrel and the price of West Texas Intermediate crude on NYMEX was $77.75 per barrel.  End

 

US$1 = INR 86.48

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Ashutosh Pati

Edited by Tanima Banerjee

 

 

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