Released September 06, 2024 | SUGAR LAND
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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--The statistical arm of the U.S. Energy Department expects global crude oil prices will be about 15% below 2022 levels next year, though some analysts question whether any long-term outlook is valid.
The Energy Information Administration (EIA) is the data keeper for the Energy Department. Each month, it publishes a report highlighting forecasts for everything from natural gas production across the primary inland shale basins to global crude oil prices.
In its monthly market report for August, the EIA said it expected the price for Brent crude oil, the global benchmark for the price of oil, to average $86 per barrel in 2025, up $2 from the expected 2024 average.
Brent on Thursday was trading at around $74 per barrel. Swiss investment bank UBS in a research note published Wednesday said that crude oil prices were under pressure largely from weak economic performance in China.
Prices did spike earlier in the week on concerns that political wrangling would lead to prolonged production cuts from Libya, but economic concerns have taken center stage. UBS, however, is expecting a recovery.
"While prices are likely to stay volatile in the near term, we retain a positive outlook and expect prices to recover from current levels over the coming months," analysts Giovanni Staunovo and Wayne Gordon wrote.
They think traders are too pessimistic, expecting Brent to move back above the $80 mark over the coming months. Asked how UBS conducts its forecasting, Staunovo told Industrial Info that he takes a broad approach, relying not just on the EIA, but on analysis from the likes of the Organization of the Petroleum Exporting Countries (OPEC) as well.
"On the energy agencies, my take is always about relative changes versus the previous month, not about preferring one over the other," he said.
EIA, OPEC and the Paris-based International Energy Agency (IEA) all produce monthly forecasts, though the EIA is something of an outlier in its price specifics. OPEC and the IEA, however, do point to specific trends, such as momentum in the Chinese economy, that would influence the market direction.
But each has its various critics. The IEA tends to emphasize the importance of transitioning away from fossil fuels more than the other agencies, while OPEC has been accused of operating a cartel bent on controlling prices.
Hillary Stevenson, a senior director for energy market intelligence at IIR, said there are too many variables apart from economic fundamentals that go into determining the direction for the price of crude.
"In general, I'm not a fan of forward estimates because they are always wrong," she said. A case in point would be estimates from big banks like Goldman Sachs, which tend to call for an imminent return to $100 per barrel crude oil. Brent last touched $100 in August 2022.
The EIA, meanwhile, is routinely under fire for its weekly estimates on crude oil inventories and the total amount of refined petroleum products sent to the market, which serves as a loose barometer for demand.
Stevenson at IIR said she typically discounts the EIA altogether, while Tamas Varga, an analyst at London oil broker PVM, said it might be best to combine data to get a comprehensive picture.
"It might make sense to take the mean of OPEC/IEA," he said. "Another approach is to concentrate on annual changes in supply and demand and not focusing on absolute numbers."
Barrel counters may be spending much of their week on parsing through EIA data to find discrepancies with their own modelling, in many cases favoring their math over the government's. EIA does include adjustment factors that may skew historic data, meanwhile, though it's unclear if variances in a few thousand barrels are at all influential in the grand scheme.
All three agencies--OPEC, the EIA and the IEA--release their monthly reports for September next week. With the world's leading economies, China and the United States, teetering, and with geopolitical risk largely baked in, variable scenarios may be expected.
"OPEC demand data is always too high, and IEA's is sometimes on the low side," IIR's Stevenson said. "A range here would probably work, but this is the biggest wild card."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
The Energy Information Administration (EIA) is the data keeper for the Energy Department. Each month, it publishes a report highlighting forecasts for everything from natural gas production across the primary inland shale basins to global crude oil prices.
In its monthly market report for August, the EIA said it expected the price for Brent crude oil, the global benchmark for the price of oil, to average $86 per barrel in 2025, up $2 from the expected 2024 average.
Brent on Thursday was trading at around $74 per barrel. Swiss investment bank UBS in a research note published Wednesday said that crude oil prices were under pressure largely from weak economic performance in China.
Prices did spike earlier in the week on concerns that political wrangling would lead to prolonged production cuts from Libya, but economic concerns have taken center stage. UBS, however, is expecting a recovery.
"While prices are likely to stay volatile in the near term, we retain a positive outlook and expect prices to recover from current levels over the coming months," analysts Giovanni Staunovo and Wayne Gordon wrote.
They think traders are too pessimistic, expecting Brent to move back above the $80 mark over the coming months. Asked how UBS conducts its forecasting, Staunovo told Industrial Info that he takes a broad approach, relying not just on the EIA, but on analysis from the likes of the Organization of the Petroleum Exporting Countries (OPEC) as well.
"On the energy agencies, my take is always about relative changes versus the previous month, not about preferring one over the other," he said.
EIA, OPEC and the Paris-based International Energy Agency (IEA) all produce monthly forecasts, though the EIA is something of an outlier in its price specifics. OPEC and the IEA, however, do point to specific trends, such as momentum in the Chinese economy, that would influence the market direction.
But each has its various critics. The IEA tends to emphasize the importance of transitioning away from fossil fuels more than the other agencies, while OPEC has been accused of operating a cartel bent on controlling prices.
Hillary Stevenson, a senior director for energy market intelligence at IIR, said there are too many variables apart from economic fundamentals that go into determining the direction for the price of crude.
"In general, I'm not a fan of forward estimates because they are always wrong," she said. A case in point would be estimates from big banks like Goldman Sachs, which tend to call for an imminent return to $100 per barrel crude oil. Brent last touched $100 in August 2022.
The EIA, meanwhile, is routinely under fire for its weekly estimates on crude oil inventories and the total amount of refined petroleum products sent to the market, which serves as a loose barometer for demand.
Stevenson at IIR said she typically discounts the EIA altogether, while Tamas Varga, an analyst at London oil broker PVM, said it might be best to combine data to get a comprehensive picture.
"It might make sense to take the mean of OPEC/IEA," he said. "Another approach is to concentrate on annual changes in supply and demand and not focusing on absolute numbers."
Barrel counters may be spending much of their week on parsing through EIA data to find discrepancies with their own modelling, in many cases favoring their math over the government's. EIA does include adjustment factors that may skew historic data, meanwhile, though it's unclear if variances in a few thousand barrels are at all influential in the grand scheme.
All three agencies--OPEC, the EIA and the IEA--release their monthly reports for September next week. With the world's leading economies, China and the United States, teetering, and with geopolitical risk largely baked in, variable scenarios may be expected.
"OPEC demand data is always too high, and IEA's is sometimes on the low side," IIR's Stevenson said. "A range here would probably work, but this is the biggest wild card."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
