Two leading energy agencies say oil prices to increase to US$80 per barrel

The U.S Energy Information Agency (EIA) and the International Energy Agency (IEA) both forecast oil prices to hit just about US$80 per barrel in 2023.

The EIA, reporting via its Short-Term Energy Outlook (STEO) published earlier this month, said that it expects prices to increase modestly to just below US$80.

“Following the OPEC+ announcement on June 4 to extend crude oil production cuts through 2024, we [the EIA] forecast global oil inventories to fall slightly in each of the next five quarters,” stated the agency. “We expect these draws will put some upward pressure on crude oil prices, notably in late-2023 and early-2024. We forecast the Brent crude oil spot price will average $79 per barrel (b) in the second half of 2023 (2H23) and $84/b in 2024.”

The upward projections reverse the slightly downward trend observed for the first five months in the year. Based on EIA data, West Texas Intermediate (WTI) prices, the leading oil-price benchmark for North America, shows that oil prices declined between January and May 2023, falling from US$78 to US$71.74 as of last month.

Brent crude oil spot price, another leading price benchmark, had likewise shown declines in the first two quarters of 2023, falling from US$81 to about US$78.80. The outlook shows that by Quarter Four, the price is expected to have inched up to US$79.97.

For its part, the International Energy Agency (IEA), via its report “Oil 2023: Analysis and Forecast to 2023,” similarly placed the oil-price outlook for 2023 below US$80 a barrel, even for their “high-price” scenario.

The IEA’s “high-price” scenario outlook beyond 2023 does augur for prices beyond US$80, but given the high levels of uncertainties experienced in the global economy over the last few years, even the six-month outlook for the rest of 2023 could be challenged.

The upward outlook comes on the heels of Saudi Arabia’s announced production cuts scheduled to commence in July 2023. The Saudi’s cuts join the rest of OPEC+ members who had already agreed to extend their voluntary reductions of approximately 2 million barrels per day.

The Price of Gas

Given the understandable relationship between crude oil and gasoline prices, the outlook has implications for drivers.

“Gas is not going to become cheaper,” Jorge Leon, senior vice president of oil markets research at Rystad Energy, told the Associated Press. “If anything, it will become marginally more expensive.”

Nevertheless, the EIA’s data shows that while gasoline prices demonstrated a slight uptick in June to about US$3.64, it is expected to ease for the rest of the year, reaching approximately US$3.40 by August, according to the EIA’s outlook.

Readers may recall that in 2022, following the start of the Russia-Ukraine war, prices had surged, peaking at about US$4.93 per gallon last June.

Turning to Belize, these changes should have knock-on effects on the local gasoline prices, given that Belize sources its fuel products from North America.

For instance, Regular gasoline prices decreased last month to $12.00, down from $12.60 in April, a change which signals a change in the landed costs, especially considering thecontinuing fuel-price stabilization program’s design.