MOSCOW (MRC) -- The EIA forecasts that crude oil prices will begin declining in November 2021 and will decline through 2022, according to Hydrocarbonprocessing.
We expect that the price of WTI will fall from an average of USD76/b in January 2022 to USD62/b in December and that the price of Brent will fall from USD79/b in January 2022 to USD66/b in December, said EIA.
Since the third quarter in 2020, global demand for crude oil and petroleum products has increased faster than production, which has led to inventory draws and increasing crude oil prices.
In February 2020, before the World Health Organization declared COVID-19 a pandemic, the spot price for Brent crude oil averaged USD56 per barrel and USD51/b for West Texas Intermediate (WTI). The spot prices for Brent fell to USD18/b and WTI to USD17/b in April 2020 because of the significant decline in demand caused by the pandemic.
Prices have since increased and are now above pre-pandemic levels because of returning demand and slow global oil production growth. In October, the price of Brent crude oil averaged USD84/b, and the price of WTI averaged USD81/b, the highest nominal prices since October 2014. In the EIA's November Short-Term Energy Outlook (STEO), they forecast that global liquid fuels inventories will begin building in 2022, driven by rising production from OPEC+ and the United States, which will contribute to falling crude oil prices.
The futures markets are similarly showing high prices in the near term compared with longer-dated contracts. Crude oil stock levels, among other factors, affect the relationship between near-term and longer-term futures prices.
Differences in prices between crude oil contracts for delivery in the near term compared with contracts for delivery at later dates indicate market expectations that stock draws will moderate. Low crude oil inventories, both globally and in the United States, have put upward price pressure on near-dated contracts, whereas longer-dated contract prices likely reflect expectations of a more balanced market. Because of the upward price pressure on the near-term contracts, near-dated contracts have higher prices than longer-dated contracts, a situation referred to as backwardation. When near dated contracts have lower prices than longer-dated contracts, it is known as contango.
As MRC informed before, US commercial crude stocks fell 3.48 million barrels to 413.96 million barrels in the week ended Sept. 17, to more than 8% below the five-year average, Energy Information Administration data showed. Stocks were last lower Oct. 5, 2018.
We remind that in late August, 2021, US crude stocks dropped sharply while petroleum products supplied by refiners hit an all-time record despite the rise in coronavirus cases nationwide, the Energy Information Administration said. Crude inventories fell by 7.2 million barrels in the week to Aug. 27 to 425.4 million barrels, compared with analysts' expectations in a Reuters poll for a 3.1 million-barrel drop. Product supplied by refineries, a measure of demand, rose to 22.8 million barrels per day in the most recent week. That's a one-week record, and signals strength in consumption for diesel, gasoline and other fuels by consumers and exporters.
We also remind that US crude oil production is expected to fall by 160,000 barrels per day (bpd) in 2021 to 11.12 million bpd, EIA said in a monthly report earlier this year, a smaller decline than its previous forecast for a drop of 210,000 bpd.