The US Energy Information Administration’s (EIA) published its January Short-Term Energy Outlook (STEO), forecasting that the Brent crude oil spot price will average $65 per barrel (b) in 2020 and $68/b in 2021 and that the West Texas Intermediate (WTI) spot price will average $59/b in 2020 and $62/b in 2021.
Specifically, EIA expects that crude oil prices will remain at high levels in the first few months of 2020, reflecting a price premium on crude oil from recent geopolitical events. However, this price premium will fall in the first half of 2020, and market fundamentals will increase the crude oil price forecast in the second half of 2020 and in 2021.
In addition, various geopolitical events have provided pressure on crude oil prices in recent months. These events include attacks on oil tankers transiting the Persian Gulf and the Red Sea, the September 2019 attack on Saudi Arabia’s energy infrastructure, and recent tensions between the US and Iran.
Monthly average Brent prices grew from $63/b in September to $67/b in December. Crude oil prices increased during this period despite global liquid fuels inventories growing by 130,000 barrels per day (b/d).
Further increasing the geopolitical risk premium on global oil prices, the US military action in Iraq in January 2020 increased uncertainty about possible disruptions to oil production and shipping in the Middle East. Following these developments, the price of Brent crude oil reached $70/b, but prices have subsequently fallen.
Finally, with the risk premium decreasing, EIA assumes that Brent prices will reduce in early 2020 to an average of $62/b in May.
EIA does not forecast supply disruptions, and any physical supply disruptions would put upward pressure on prices
See further information in the following report