The U.S. Energy Information Administration increased its West Texas Intermediate crude price forecast for 2013, predicting new pipeline and rail capacity will narrow WTI’s discount to Brent oil.
WTI crude will average $93.92 a barrel this year, up 2.2% from the March projection of $91.92, the Energy Department’s statistics unit said in its monthly Short-Term Energy Outlook. The U.S. benchmark grade will average $92.25 in 2014, up 8 cents from the previous month’s estimate of $92.17.
WTI crude for May delivery rose 84 cents, or 0.9%, to $94.20 a barrel on the New York Mercantile Exchange. Brent for May settlement gained $1.57, or 1.5%, to end the session at $106.23 on the London-based ICE Futures Europe exchange. Brent settled at a $12.03 premium premium to WTI today, widening from yesterday’s $11.30, which was the narrowest gap since June 22.
“We raised our WTI forecast to reflect the narrowing spread with Brent,” said Tancred Lidderdale, an economist with the EIA in Washington who helped write the report. “It’s coming in a lot faster than we expected because of increasing rail traffic that’s getting more barrels to where they are needed.”
Brent, the benchmark grade for more than half the world’s crude, will average $107.96 a barrel in 2013, down 37 cents from last month’s forecast. The average cost of domestic and imported grades used by U.S. refiners will be $98.76 a barrel this year, up $2.14 from the March projection of $96.62. Brent will drop to $100.83 a barrel next year and the average cost for refineries will climb to $96.99 in 2014, the EIA said.
“The price for West Texas Intermediate crude oil is expected to average $94 a barrel this year, unchanged from last year, while international benchmark Brent crude oil is forecast to be $4 less than last year at $108 per barrel,” Adam Sieminski, the administrator of the EIA in Washington, said in a statement.
The forecast spread between Brent and WTI is about $14 a barrel for 2013, down from last month’s projection of $16. The spread will narrow to $9 in 2014, unchanged from the March report. The Brent premium will shrink because growing pipeline capacity will lower the cost of shipping oil from the central U.S. to refineries on the Gulf Coast, according to the report.