Brent crude oil spot prices are expected to average $67/bbl this year, which is $3/bbl lower than forecast last month in the US Energy Information Administration’s Short-Term Energy Outlook.  In this month’s STEO, EIA reports expecting Brent to remain at $67/bbl in 2020. EIA’s lower Brent price path for this year reflects rising uncertainty about global oil demand growth.

Brent spot prices averaged $71/bbl in May, largely unchanged from April and almost $6/bbl lower than the price in May 2018. However, Brent prices fell sharply in recent weeks, reaching $62/bbl on June 5.  EIA expects that crude oil prices will increase from current levels by yearend. It forecasts that Brent prices will average $68/bbl in this year’s fourth quarter because of inventory withdrawals during the summer, lower-than-expected production from the Organization of Petroleum Exporting Countries, and the expected increase in demand for light, sweet crude oil ahead of the implementation of low sulfur bunker fuel regulations in January 2020. EIA expects that prices will remain near that level in 2020 based on its forecast of relatively balanced global oil markets next year.

World oil demand, supply

Both China and the US issued tariffs on one other. In addition, expected industrial activity, as measured by the manufacturing Purchasing Managers’ Index (PMI), declined across several countries in May, and America’s manufacturing PMI fell to its lowest level since 2009.

These developments are contributing to concerns that economic growth could be lower than market participants’ expectations, which would cause oil demand growth to also be lower than expected, EIA said.  EIA expects global oil demand to rise by 1.2 million b/d this year, which is 200,000 b/d lower than the May forecast. EIA also expects demand in 2020 to increase by 1.4 million b/d, about 100,000 b/d lower than the previous forecast.

Declining crude oil production in Venezuela and Iran, as well as Saudi Arabian’s over-compliance with the agreed-upon production cuts, pushed crude oil output among members of the Organization of Petroleum Exporting Countries to 29.9 million b/d in May—the lowest for any month since July 2014.