US EIA lowers 2024 oil price outlook by $3/b after steep price declines in May

The US Energy Information Administration lowered its 2024 crude price forecasts by more than $3/b to account for an $8/b decline in Brent prices from April to May, although the agency expects prices to rebound in the second half of the year.

"Although we expect oil prices to rise from early June levels, lower-than-expected Brent prices in May mean our forecast for 2024 is $84/b, 4% lower than our May forecast," the EIA said in its June Short-Term Energy Outlook.

The agency's Brent price forecast for 2024 represents a $3.64 reduction from the prior month's estimate of $87.79/b, the outlook said. Similarly, EIA lowered its WTI price forecast for 2024 by $3.35, to $79.70/b, the outlook said.

The extension of OPEC+ cuts through the third quarter of 2024 led EIA to reduce its forecast for OPEC+ oil production for the rest of 2024, which will cause Brent prices to rise to an average of $85/b during the second half of the year, the outlook said.

Upward price pressure looms

"Although crude oil prices initially fell following the OPEC+ announcement, we expect the extension of all voluntary cuts through [Q324] will cause global oil inventories to continue falling through [Q125] and put upward pressure on oil prices over that period," the outlook said.

The EIA expects Brent prices will average $83.71/b in Q2, $83.25/b in Q3, and $86.64/b in Q4, according to the outlook.

With the phaseout of OPEC+ supply cuts expected to start in Q4, supported by ongoing supply growth from countries outside of OPEC+, the EIA expects moderate inventory builds for most of 2025.

"We forecast that global oil inventories will begin increasing at an average of 0.4 million b/d in [Q2]25 and will increase by 0.6 million b/d in the second half of 2025," the outlook said.

In 2025, the EIA expects Brent will average $85.38/b and WTI will average $80.88/b, both unchanged from the prior month's estimate.

Beginning in October, the members of OPEC+ plan to gradually phase out their production cuts on a monthly basis through the end of September 2025, the outlook noted. Forecast oil production outside of OPEC+ is expected to rise nearly 2 million b/d in 2024, led by the US, Canada, Brazil and Guyana, the EIA said.

Gasoline prices

Retail gasoline prices are expected to average $3.42/gal this year, down 12 cents from the previous estimate. The EIA sees gasoline prices rising to $3.47/gal in 2025, a 7-cent decrease from last month's estimate.

The agency also decreased its expectations for diesel prices, putting the fuel at $3.88/gal this year, down 11 cents from the prior estimate, and at $3.99/gal in 2025, a 16-cent decrease from May's estimate.

The EIA increased its 2024 outlook for US oil production by 40,000 b/d to 13.24 million b/d, and expects growth to continue in 2025 to put US crude production at 13.71, a 20,000 b/d decrease from last month's estimate. If the EIA's forecast is realized, US crude oil production would set new annual records in both 2024 and 2025, the outlook said.

"Increasing production is led by the Permian region, which is the source of almost 50% of domestic crude oil production, followed by the Eagle Ford region and the Federal Gulf Mexico," the EIA said. The Permian region's proximity to refining and export terminals on the Gulf Coast, established takeaway capacity, and improved new well productivity support production growth in the region, the outlook said.

The agency boosted its world liquid fuels consumption outlook by 140,000 b/d for 2024 to 102.98 million b/d, while increasing its 2025 estimate by 250,000 b/d to 104.51 million b/d.