The Energy Information Administration expects Brent crude prices this year to average US$70 a barrel, falling to US$67 a barrel in 2020, the authority said in the latest edition of its Short-Term Energy Outlook.
Both forecast figures are about US$5 higher than what the EIA had projected in the March edition of the monthly report, reflecting the steady rise in benchmark prices since March. For reference, the EIA noted the average price of Brent crude for 2018 was US$71 per barrel.
With regards to oil fundamentals, the EIA said it expected demand to exceed supply this year, with global supply falling by about 200,000 bpd. Then in 2020 this will grow by 1.9 million bpd, of which 1.5 million bpd will come from the United States. Demand, however, will rise by less. In fact, according to EIA’s forecast, it will rise by as much as U.S. production will add to global supply, at 1.5 million bpd. This year, demand will grow more slowly, at a rate of 1.4 million bpd.
Sanctions on Iran and Venezuela, according to the EIA, will pressure OPEC production by 1.7 million bpd this year compared with 2018 production rates, to an average 30.3 million bpd. In fact, the authority’s forecast suggests the combined production loss of Iran and Venezuela would be greater than 1.7 million bpd as this year higher output in some OPEC members will partially offset the declines in Venezuelan and Iranian supply, with 1.7 million bpd being the net decline in OPEC production.
Outside oil, the EIA has some good news for the renewables space. According to its latest STEO, this year renewable generation capacity—excluding hydropower—will supply 11 percent of total power output this year, up from 10 percent last year. This will rise further to 13 percent in 2020. Although the pace of growth may seem moderate, it is a steady rate.