With average prices in the U.S. for both diesel and gasoline higher in 2017 compared to 2016, and with global oil production being continually ratcheted downwards by the Organization of the Petroleum Exporting Countries (OPEC), the outlook for fuel prices in 2018 remains uncertain, according to the U.S. Energy Information Administration.
Still, with non-OPEC nations increasing oil production rates and thus helping to bolster global oil inventories – albeit at a far smaller pace than previously forecast – petroleum prices may stabilize in the way ahead.
According to the latest Short-Term Energy Outlook (STEO) issued by the EIA last week, global liquid fuels demand is expected to increase in 2018, but not keep pace with supply growth, resulting in global liquids inventories increasing modestly in 2018.
The agency’s latest STEO forecasts increasing global liquid fuels inventories by an average of 50,000 barrels per day (b/d) in 2018, a downward revision from a 290,000 b/d inventory increase forecast in the November STEO.
That change is driven by upward historical revisions to Chinese consumption and downward revisions to forecast production from countries within OPEC
Back in late November, OPEC announced an extension of its agreement to reduce crude oil production through the end of 2018, which was broadly in line with market expectations. The non-OPEC countries that agreed to crude oil production cuts this year also agreed to continue limiting output through the end of 2018, EIA added.
The agency estimated that OPEC crude oil production declined slightly this year as a result, averaging 32.5 million b/d in 2017, which is a 200,000 b/d decrease from 2016 levels. The agency also thinks OPEC crude oil production to average 32.7 million b/d in 2018.
Although OPEC is expected to restrain production growth, EIA forecasts that higher output from non-OPEC countries will contribute to overall growth in world liquid fuels production in 2018.
The non-OPEC outlook for liquid fuels production is now 100,000 b/d higher what was forecast back in November, and this growth – together with the forecast 300,000 b/d worth of growth in OPEC crude oil production and another 100,000 b/d increase in OPEC non-crude liquids production – results in forecast total global liquids production growth of 2 million b/d in 2018
In the U.S., crude oil production is forecast to increase by an average of 800,000 b/d in 2018, while Canada, Brazil, Norway, the United Kingdom, and Kazakhstan are projected to add a combined 700,000 b/d of growth in liquids production in 2018.
Still, EIA stressed that its forecast for oil prices remains “highly uncertain.” The agency said the value of options contracts currently establishes the lower and upper limits for oil trading pegged to March 2018 at $48 per barrel and $68 per barrel, respectively.
In terms of fuel prices, the U.S. average for diesel dipped 9/10ths of a penny this week to $2.901 per gallon, according to EIA, which is 37.4 cents per gallon higher compared to the same week in 2016.
New England is the only region of the country to experience an increase in the price of diesel this week; a 2.7 cent jump to $2.924 per gallon. By contrast, diesel prices stayed flat or declined in every other area of the country this week, EIA noted.
The U.S. average for gasoline dipped 3.5 cents this week to $2.45 per gallon, which is 18.6 cents per gallon higher compared to the same week last year. EIA added that gasoline prices declined in every region of the U.S. this week.