The U.S. Energy Information Agency’s(EIA) short-term energy outlook forecast calls for non-OPEC countries to experience increased oil production gains this year and next. This marks a reversal of the last two years, when OPEC was responsible for the majority of production gains.
EIA says U.S. on track to become oil production leader
The report highlights that countries such as the United States, Brazil, Canada and Guyana will drive this growth and overshadow OPECThis comes after Saudi Arabia and other Middle Eastern countries announced plans to cut production by about 1.16 million barrels a day starting next month.
According to the EIA, total non-OPEC liquid fuels production is expected to increase by 1.9 million barrels per day in 2023 and 1 million barrels per day in 2024. In contrast, OPEC production will decline by 500,000 barrels per day in 2023 and then increase by 1 million barrels per day in 2024, after the group’s production agreement expires.
The report also highlights that nearly half of the expected gains by non-OPEC producers over the next two years will come from the United States. U.S. crude oil production is expected to increase by 5.5% to 12.54 million barrels per day this year and by 1.7% to 12.75 million barrels per day in 2024.
In addition, the EIA predicts that U.S. retail gasoline prices will hover around $3.50 per gallon this summer, peaking between $3.60 per gallon and $3.70 per gallon in June. This represents a significant drop from last year, when prices spiked as high as $5 per gallon as oil prices rose and storage levels fell. According to EIA forecasts, the average U.S. household is expected to spend between $2,140 and $2,730 on gasoline this year, up from $2,780 in 2022.
Stable oil demand in global oil markets
The report also indicates that gasoline inventories are declining as refineries undergo renovations, raising fears of higher prices this summer. However, the EIA estimates that refinery gasoline production will grow faster than U.S. consumption, increasing inventories and driving down prices. The average retail price of a gallon of gasoline in the U.S. was $3.608 this week, compared to $4.11 a year earlier.
The price of Brent crude oil is expected to be around $85 a barrel this year, while U.S. West Texas Intermediate crude is expected to be around $79.24. Both estimates were about $2 higher than EIA’s March forecast of OPEC production restrictions.
However, higher crude oil prices could hurt refining margins and encourage refiners to reduce throughput, the EIA warned, forecasting average U.S. refinery utilization of 90% this year, down from over 91% last year.
Finally, the EIA expects global oil markets to be in relative balance in the coming year, with oil demand remaining relatively stable. Liquid fuel consumption is expected to increase by 1.4 million barrels per day in 2023 and 1.8 million barrels per day in 2024. U.S. consumption of petroleum and other liquid fuels would increase by 0.5 percent to 20.4 million barrels per day in 2023 and then increase by 1.6 percent to 20.7 million barrels per day in 2024.