Even as oil prices continue their upward momentum, the US Energy Information Administration is predicting an global oversupply situation as soon as the first quarter of 2022.
In its Short Term Energy Update, released Tuesday, the EIA said global oil consumption has exceeded production for five consecutive quarters and would continue to do so through the end of 2021. During the five-quarter shortfall, the agency said, total petroleum stocks among countries in the Organisation for Economic Cooperation and Development fell by 424 million barrels.
Crude oil inventories at the Cushing, Oklahoma, facility that serves as the delivery point for West Texas Intermediate crude were described as “especially low”, with inventories falling to 24 million barrels on 29 October. That constitutes only 31% of Cushing’s storage capacity in use. The EIA said immediate relief is not expected.
“We forecast global crude oil demand will exceed global supply through the end of the year, contribute to some additional stocks draws, and keep the Brent crude price above $80 per barrel through December,” the agency said.
The situation, however, should change shortly after the beginning of the new year. The combination of increased production from Opec+ nations, higher production totals from US producers and a slowing growth in global oil demand should have supply outpacing demand for the first time since the second quarter of 2020.
“We expect this shift will put downward pressure on the Brent price, which averages $72 per barrel for 2022 in our forecast,” the EIA said.
The federal agency said US crude production increased from approximately 10.7 million bpd in September to 11.4 million bpd in October as offshore production disrupted by Hurricane Ida came back online.
The EIA projects US production will rise to 11.6 million bpd in December, with its estimated 2022 production average set at 11.9 million bpd.
Shale oil production, the agency said, will likely drive the production increases in the coming year.
The EIA report was the second this week to project an increase in production in the coming year. US analysis firm Enverus released a report Tuesday saying that it expected the nation’s oil production to increase by 600,000 bpd in the period between 31 December 2020 and 31 December 2021, with further growth projected in 2022. That growth, Enverus said, should push Brent prices back into the $70 per barrel range.