Despite the recent surprise cut in production from the OPEC+ group of countries, the US Energy Information Administration (EIA) has said it expects this and next year to still see a surplus of crude oil, according to its latest Short-Term Energy Outlook (STEO).
While production is expected to be lower than usual in Saudi Arabia and Russia, two of the world’s biggest oil producers, the EIA believes that the world’s production of oil will undergo a 1.5 million barrels per day (bpd) increase this year overall due to increases in non-OPEC production, particularly in South and North America. For example, ExxonMobil, the maker of Mobil grease and lubricant products, has a string of projects to come online offshore of Guyana.
The EIA predicts global average consumption of 100.87 million bpd compared to supply of 101.3 million bpd, leading to a small surplus. The EIA explained its thinking as follows:
“Increasing risks in the U.S. and global banking sectors increases uncertainty about macroeconomic conditions and their potential effects on liquid fuels consumption, which increases the possibility of liquid fuels consumption being lower than our current forecast. We expect global oil markets will be in relative balance over the coming year.”
The EIA’s prediction contrasts with some market predictions that the OPEC+ production cuts will tighten the market sufficiently to force oil prices up to $100 per barrel. While the EIA does concede that the market will tighten over the year, it still expects a slight surplus, even towards the end of this year.