EIA again raises US fuel price outlook as demand destruction looms

US retail diesel prices are expected to hit a fresh record high in May, averaging $5.61/gal, the Energy Information Administration said May 10, as it also raised the summertime US gasoline price outlook.

Higher activity by long-haul truckers and oil and gas drillers has raised diesel demand, EIA said.

US distillate stocks fell 9.4 million barrels, or 8%, in April to levels 24% below the five-year average, EIA said. Distillate exports are contributing to lower stocks, with preliminary April net exports of 1.3 million b/d marking the highest US net exports since September 2019.

EIA said possible demand destruction as a result of soaring retail prices remains one of the key uncertainties ahead for oil markets.

US President Joe Biden said May 10 that Americans were already "doing everything in their power to figure out how not to have to show up at the gas pump," but that a lack of public transportation in many regions limited that impact.

Global oil balance

Globally, EIA sees oil markets mostly balanced through 2023 under current dynamics, but a European ban on Russian oil imports would lead to tighter supply and higher prices.

EIA cut its outlook for Russian liquids output by 630,000 b/d through 2023 to 9.15 million b/d.

It trimmed its outlook for global oil demand growth by 200,000 b/d to 2.22 million b/d for 2022 as a result of lower demand in China and the US.

EIA raised its outlook for OPEC production to 28.95 million b/d in 2022, up 140,000 b/d from last month, and to 29.54 million b/d in 2023, up 170,000 b/d.

US crude supply

US oil production is still expected to grow as a result of higher crude prices, but EIA trimmed the outlook by 100,000 b/d for 2022. It now sees US drillers pumping 11.91 million b/d in 2022 and 12.85 million b/d in 2023, which would mark an all-time high. US crude supply averaged 12.3 million b/d in 2019.

EIA raised its outlook for WTI prices to $98.20/b in 2022, up 24 cents from last month's forecast, and to $93.24/b in 2023, up $4.67/b.

Brent prices are expected to average $103.35/b in 2022, down 2 cents from last month, and $97.24/b in 2023, up $4.67/b.