The US Energy Information Administration pushed its 2016 crude oil forecast lower Tuesday, as shaky global growth and higher production sent US crude oil futures below the lowest closing price in six-years in midday trading.
EIA estimates total US crude oil production declined by 100,000 barrels per day in July compared with June. Production is expected to continue decreasing through mid-2016 before growth resumes late in 2016.
Projected US crude oil production averages 9.4 million bpd in 2015 and 9.0 million bpd in 2016, 0.1 million bpd and 0.4 million bpd lower, respectively, than in July’s STEO.
The federal EIA said in its monthly Short-Term Energy Outlook that it had lowered its 2016 forecast price for US benchmark oil by $8 to $54 per barrel in 2016 and its 2015 forecast by $6 to $49 per barrel. The administration said it expects Brent, the global benchmark, to average about $59 per barrel in 2016 and about $54 per barrel in 2015, Fuelfix reported.
“The recent price declines reflect concerns about lower economic growth in emerging markets, expectations of higher oil exports from Iran, and continuing actual and expected growth in global inventories,” the agency said in its analysis.
North Sea Brent crude oil prices averaged $57 per barrel in July, a $5 per barrel decrease from June. Brent crude oil spot prices fell further in early August, settling at $48 per barrel on August 7.
The current values of futures and options contracts for November 2015 delivery—Market Prices and Uncertainty Report suggest the market expects WTI prices to range from $34 per barrel to $64 per barrel (at the 95% confidence interval) in November 2015.
On July 14, the P5+1 (the five permanent members of the United Nations Security Council and Germany) and Iran announced an agreement that could result in relief from United States and European Union nuclear-related sanctions, which include some oil-related sanctions.
If the agreement is implemented and sanctions relief occurs, it will put additional Iranian oil supplies on a global market that has already seen oil inventories rise significantly over the past year.
This forecast assumes sanctions relief occurs in 2016, contributing to an annual average increase in Iranian crude oil production of 0.3 million bpd from 2015 to 2016, with most of the increase coming in the second half of 2016.
