Oil dropped Tuesday on the release of the new Short-term Energy Outlook (STEO) released by the Energy Information Administration. The monthly update predicts much more robust production next year than was predicted last month. This is the first upward revision for 2023 in the last 5 months.
U.S. production is expected to reach 12.34 million barrels per day (pbd), implying a 3.9% growth rate and breaching the 12.315 million bpd record set in 2019. U.S. petroleum and other liquefied fuels consumption is set to expand 0.7% to 20.51 million bpd in 2023; up slightly from the 20.48 predicted last month.
Global oil inventory change is now expected to climb 0.2 million bpd in 2022 and 2023; up from 0.1 million bpd for 2022 and -0.3 million bpd for 2023 estimated last month. The STEO report elaborates that “in our forecast fall by 0.2 million barrels per day (b/d) in the first half of 2023 (1H23) before rising by almost 0.7 million b/d in 2H23.” This results in a higher inventory level at the end of 2023 than estimated last month and the average Brent crude oil price at $92 per barrel in 2023; about $3/barrel less.
This report assumes an economic contraction in the U.S. in the 4th quarter of 2022 and first quarter of 2023; notably shorter and milder contraction than assumed in the last month’s STEO. This assumes the U.S. GDP will be flat in 2023 per the S&P Global macroeconomic model. Differences in the realized economic activity can significantly change the realized production and consumption estimated in the report.
The total world production for crude oil and liquified fuels in 2023 jumped to 101.06 million bpd from 100.98 million bpd last month, while total world consumption dropped to 100.82 million bpd versus 100.98 million bpd predicted last month.
The EIA estimate an average WTI crude spot price at 86.36 for 2023; down about $3/barrel from the last release.
