"EIA: Oil prices will not rally despite Saudi output cut"

" EIA: Oil prices will not rally despite Saudi output cut \r\n\r\nOil prices will not average more than $80 per barrel in the second half of this year, despite the most recent production cut announced by Saudi Arabia, the U.S. Energy Information Administration (EIA)\u00a0 said \u00a0in its latest Short-Term Energy Outlook (STEO) released this week.\r\n\r\nAt Sunday\u2019s meeting, OPEC+ producers decided to extend their crude oil production cuts through 2024, while Saudi Arabia said it would voluntarily\u00a0 reduce its production by 1 million bpd \u00a0in July to around 9 million bpd. The Saudi cut could be extended beyond July, Saudi Energy Minister, Prince Abdulaziz bin Salman, said.\r\n\r\nDespite the Saudi cut and the extension of the current OPEC+ cuts through 2024, the EIA expects non-OPEC producers to drive global liquids production to growth of 1.5 million barrels per day (bpd) in 2023 and 1.3 million bpd in 2024, limiting the upside for oil prices. Production growth in the United States, Norway, Canada, Brazil, and Guyana will be the primary drivers of the increase in global liquids output.\r\n\r\nThe cuts, however, will result in draws in global oil inventories in each quarter between the third quarter of 2023 and the third quarter of 2024, the EIA reckons.\r\n \r\n \r\n \r\n \r\n \r\n\r\nOil inventories will drop slightly next year, compared to last month\u2019s STEO that forecast inventory growth of 300,000 bpd for 2024.\r\n\r\nThis, the U.S. administration says, will put gradual pressure on oil prices.\r\n\r\nBut oil is not expected to rally, and\u00a0 Brent Crude prices will average $79 per barrel in the second half of 2023, which is $1 a barrel higher than in May\u2019s STEO estimate. The 2024 oil price forecast was raised to an average of $84 per barrel, up by $9 per barrel compared to last month\u2019s assessment.\r\n\r\nEarly on Wednesday, Brent Crude prices traded just below $76 per barrel as the Saudi cut failed to lift prices with the market focused more on the economic slowdown instead of expectations of a tighter market further out this year.\r\n\r\nOil consumption will rise by 1.6 million bpd this year, and by another 1.7 million bpd next year, the EIA said, but noted that \u201cSignificant uncertainty remains around global economic growth and the potential impact on oil demand over the forecast period.\u201d\r\n\r\nThe EIA also revised down its estimates for the U.S. economy and diesel consumption for this year and next.\r\n\r\nThe latest forecasts assume U.S. GDP growth of 1.3% in 2023 and 1.0% in 2024, which is down from last month\u2019s forecast of 1.6% in 2023 and 1.8% in 2024, based on the S&P Global macroeconomic model for the U.S. economy and EIA\u2019s energy price forecasts.\r\n\r\nThe reduction in forecast GDP growth has led to lowered estimates for distillate fuel \u2013 mostly diesel \u2013 consumption. The EIA now expects U.S. distillate consumption to fall in 2024, which is a change from last month\u2019s forecast that had expected distillate consumption to grow next year.\r\n\r\n\u201cRecently, service sector production has been the primary driver of GDP growth, which requires less diesel consumption,\u201d the EIA said in its\u00a0 discussion \u00a0about diesel consumption and economic growth as part of the latest STEO.\r\n\r\n\u201cWe expect this trend to continue; we forecast in our STEO that U.S. diesel consumption in the second half of 2023 will be below the 2015\u22122019 average before a slight further decline in 2024 despite an expected increase in GDP over the same periods.\u201d\r\n\r\nEIA\u2019s forecast assumes that the Fed\u2019s interest rate increases will slow inflation without causing major disruptions to U.S. employment or economic activity.\r\n\r\n\u201cIf GDP growth does decline, we could see a further slowdown in U.S. diesel consumption,\u201d the EIA noted.\r\n\r\nDespite the Saudi attempts to further tighten the oil market and push prices higher, macroeconomic concerns about the U.S. and European economies and a possible slower-than-expected Chinese recovery continue to weigh on oil prices.\r\n \r\n \r\n \r\n \r\n \r\n "

"EIA: Oil prices will not rally despite Saudi output cut"

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