Brent Forecast Revised Higher on Tight Inventories

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--The global per-barrel benchmark for the price of crude oil could be $5 more expensive than during the first half of the year due to a decline in inventories, the U.S. Department of Energy (DOE) said.

Brent, the global benchmark for the price of oil, is up nearly 5% from the start of June to trade at about $85 per barrel in early Thursday trading. Commodities have been quiet over the last few days as traders weigh any impact from Hurricane Beryl and the slew of economic data coming out of the world's advanced economies.

The U.S. Bureau of Labor Statistics on Thursday reported the consumer price index declined by 0.1% last month, bringing the 12-month reading to 3% through June. Economists at the Organization of the Petroleum Exporting Countries (OPEC), meanwhile, kept their forecast for global oil demand unchanged at 2.25 million barrels per day (BBL/d), though that could drop to 1.85 million BBL/d by next year.

For its part, the U.S. Energy Information Administration (EIA), the statistical arm of the DOE, raised its forecast for crude oil prices in its regular monthly market report for July.

EIA said it expects Brent to average $89 per barrel during the second half of the year, up from the $84 per barrel average during the six-month period ending June 1.

"Higher prices in the second half of the year result from our forecast of persistent withdrawals from global oil inventories," it said.

The prices will be driven in part by voluntary production restraint from OPEC+, which includes the core members of OPEC and non-member state allies such as Russia. The EIA estimates global inventories will decline by 700,000 BBL/d during the second half of the year, for a combined 1.2 million BBL/d draw on the year.

For the week ending July 5, EIA data show total U.S. commercial crude oil inventories declined by 3.4 million barrels from the prior week. Total stocks are about 4% below the five-year average for this time of year.

Should withdrawals continue, it would be bullish for the commodities market. Though crude oil prices account for about half of what consumers pay at the retail level for gasoline, meanwhile, the EIA said that consumers might not notice much.

The EIA expects to see $3.50 for the average price for a gallon of regular unleaded gasoline this year and $3.40 per gallon for 2025. Travel club AAA listed the national average at $3.54 for Thursday, matching the price at the pump for this time last year.

The EIA said that improved gas mileage and improved incomes from U.S. households means they will spend about 2.3% of their disposable income on gasoline this year, lower than the average over the 2015-2023 period.

Modelling for the EIA's report for July was completed before Hurricane Beryl made landfall in the U.S. The storm hit Texas as a Category 1 hurricane on Monday, dropping 10 inches of rain on the Houston metropolitan area and leaving more than 2 million people without power in the immediate aftermath.

Beryl only had a minor impact on the energy sector, however, with only a small fraction of the total offshore oil and gas production shut in. Industrial Info did not see a major refinery impact from the storm, though some operators had reduced operations.

Industrial Info reported Thursday that Marathon's refinery in Galveston Bay was shuttered due to a power outage, though personnel expect the facility to return to normal by the weekend.

Brent crude oil is down around 3% since July 5, showing the storm failed to rattle the market's nerves.

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