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.
Oil production outside of the Organization of Petroleum Exporting Countries will climb 2% from 2012 to 53.77 million barrels a day in 2013, led by gains in North America.
U.S. crude output will climb to an average 7.3 million barrels a day this year, up from 6.47 million in 2012, according to the report. The 2013 estimate was reduced from 7.31 million projected in March. Next year’s production forecast is 7.87 million barrels a day, down from last month’s estimate of 7.88 million.
OPEC members will produce 35.98 million barrels a day this year, the EIA said. Last month’s forecast was 36.03 million.
The 12-member group pumped 29.83 million barrels of crude oil a day in March, down from 29.88 million produced in February, data showed. Saudi Arabia, the group’s biggest producer, pumped 9 million barrels of crude a day in March, unchanged from the previous month. OPEC’s non-crude oil liquids output was 5.72 million barrels a day last month.
The department cut its forecast for global oil consumption this year to 90 million barrels a day from 90.13 million estimated last month. World demand will climb to 91.33 million in 2014.
U.S. oil consumption will average 18.62 million barrels a day in 2013, up from last month’s forecast of 18.58 million. Next year demand is projected to climb to 18.65 million.
Demand from the 30 members of the Organization for Economic Cooperation and Development will average 45.57 million barrels a day this year. The forecast was cut by 70,000 barrels from last month and will be down 320,000 barrels from the 45.89 million used in 2012. OECD countries will consume 45.47 million barrels next year, according to the report.
The OECD doesn’t include developing countries such as China, India and Brazil. The DOE decreased its forecast of consumption by non-OECD countries to 44.46 million barrels a day from 44.49 million last month. That would be a 3% gain from 43.15 million in 2012. Demand will rise to 45.94 million in next year, the report showed.
“Continued strong economic growth in the emerging economies, particularly China, could put upward pressure on oil prices, though this would be offset somewhat by Europe’s weak economy,” Sieminski said.