The U.S. Energy Information Administration (EIA) slashed its outlook for crude prices this year and in 2024, despite OPEC’s efforts to support prices through a cut in oil production in May.

OPEC and its allies surprised markets in April by announcing plans to cut oil production by 1.2 million barrels per day (MMbbl/d), pushing global crude prices higher.

After the production cuts were announced last month, the EIA forecast that Brent crude oil spot prices would average about $85/bbl in 2023, while WTI crude spot prices would average $79.24/bbl.

However, concerns about weakening global economic conditions, persistent inflation and perceived risks to the banking sector “outweighed the initial increase in oil prices and have led to lower prices,” the EIA reported in its latest Short-Term Energy Outlook published May 9.

The EIA now expects Brent crude spot prices to average $79/bbl in 2023, down about 7% from last month’s forecast.

WTI spot prices are expected to average approximately $73.62/bbl this year, also down about 7% from April’s outlook. 

The EIA also lowered its outlook for crude prices in 2024 as storage inventories build and global production outpaces global demand in the second half of the year.

Brent crude prices are expected to average about $74/bbl in 2024, a decrease of $7/bbl from the EIA’s outlook last month. WTI prices are predicted to average around $69.50/bbl next year, down nearly $6/bbl from the last outlook.

Gas outlook dims

The EIA’s outlook for U.S. natural gas prices continues to weaken.

Producers saw natural gas prices rise about $9 per million Btu (MMBtu) last year but have since faced market oversupply, tepid demand and higher-than-average levels of storage inventories.

Henry Hub natural gas prices are expected to average $2.91/MMBtu in 2023, down slightly from last month’s forecast of $2.94/MMBtu for the year — and down more than 50% from 2022’s average of $6.42/MMBtu.

Gas prices should receive a lift back above $3 this summer as the demand for electric power generation surges.

U.S. Natural Gas Prices EIA STEO May 2023
Henry Hub natural gas prices have collapsed since topping $9/MMBtu in the summer of 2022. (Source: U.S. EIA Short-Term Energy Outlook May 2023, Refinitiv data)

Natural gas consumed to generate power in the U.S. from May through September will average 38 (Bcf/d). That’s the second-highest level on record, behind the 39 Bcf/d consumption seen in 2022, per EIA data.

“We expect the U.S. benchmark Henry Hub natural gas spot price to average $2.35/MMBtu in May and rise to around $3/MMBtu in July and August, when power demand peaks,” the EIA said.

The collapse in natural gas prices has caused some producers to reduce production guidance and slash drilling rig activity.

Price volatility has also affected the dealmaking market for gas-focused transactions. Speaking during first-quarter earnings on May 3, Chesapeake Energy Corp. President and CEO Nick Dell’Osso said gas-focused deals are especially difficult in a down-market.


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