EIA expects higher oil prices through the remainder of 2023 as a result of declining global inventories

The U.S. Energy Information Administration (EIA) expects global oil inventories to decline by almost a half million barrels per day in the second half of 2023, causing oil prices to rise over the remainder of the year. In its September Short-Term Energy Outlook (STEO), EIA forecasts the Brent crude oil price will average $93 per barrel in the fourth quarter of this year, up from its August forecast of less than $88 per barrel.

Oil production cuts from OPEC+ members, including Saudi Arabia’s recently announced extension of additional voluntary production cuts, contribute to EIA’s forecasts for decreasing supplies.

“We expect crude oil prices to rise as global oil inventories decrease through the end of this year,” said EIA Administrator Joe DeCarolis. “High oil prices combined with uncertain economic conditions could lessen global demand for petroleum products through 2024.”

Even as OPEC+ continues limiting oil production, EIA expects global production of liquid fuels to continue increasing in 2023 and 2024 due to production growth in non-OPEC+ countries.

Other highlights from the September STEO include:

• Electricity: EIA estimates that natural gas consumption for electricity generationwas a record high this summer, surpassing the previous record set in 2022. Natural gas consumption for electricity generation has been primarily driven by increased air conditioning demand, especially in large population centers such as Texas, Florida, and Southern California. “This summer has been another in a string of hot summers, and natural gas and renewables have played a particularly strong role in the electricity fuel mix,” DeCarolis said.

• Gasoline: EIA expects the U.S. regular-grade gasoline price to average $3.69 per gallon in the fourth quarter of 2023, up from its August forecast of $3.57 per gallon. The revised forecast is largely the result of higher crude oil prices, which are the primary component of gasoline prices. EIA also lowered its forecast for domestic gasoline consumption following a revision by the U.S. Census Bureau to its U.S. population estimates, which, in turn, reduced EIA’s estimates of how many miles U.S. motorists are driving. EIA expects U.S. gasoline consumption to average 8.9 million barrels per day in 2023, down slightly from its August forecasts.

• Propane: EIA expects propane prices at Mt. Belvieu to average 77 cents per gallon this winter heating season of October 2023 through March 2024, a slight decrease from the 81 cents per gallon average of the previous heating season. EIA will publish its full Winter Fuels Outlook on October 11, which contains forecasts for heating fuel prices, consumption, and average household fuel and energy expenditures for the coming heating season.