WTI, the grade traded in New York, will average $94.65 a barrel this year, up from the June projection of $93.25, the EIA, the Energy Department’s statistical arm, said today in its monthly Short-Term Energy Outlook. The U.S. benchmark grade will average $91.96 in 2014, unchanged from the June estimate.
Pipelines in Alberta were shut after flooding caused a leak in June. The opening of a new unit at the BP Plc (BP/) refinery in Whiting, Indiana, and the completion of additional pipeline and rail capability is providing outlets for surging supplies in the central U.S. and increased WTI prices. Supplies at Cushing, Oklahoma, the delivery point for WTI, rose to a record 51.9 million barrels in January, according to the EIA.
“We’ve had a number of factors that have boosted WTI,” said Tancred Lidderdale, an economist with the EIA in Washington who helped write the report. “We had flooding in Alberta, Canada, which reduced supply. There was the startup of the new unit at Whiting which is now operating on WTI grade crude and there are new pipelines out of the Permian Basin, which should reduce pressure at Cushing.”
The EIA forecast that Brent, the benchmark grade for more than half the world’s oil, will average $104.68 a barrel in 2013, up 3 cents from last month’s prediction, and $99.75 in 2014. The average cost of domestic and imported grades used by U.S. refiners will be $100.65 a barrel this year, up $2.17 from the June estimate of $98.48, and $97.43 next year.
The price projection assumes no disruption to energy markets coming from the unrest in Egypt.
The forecast spread between Brent and WTI is about $10 a barrel for 2013, down from last month’s projection of $11.40. The spread, which surged to a monthly average of more than $20 in February, fell to less than $5 this month. The WTI discount should widen to $8 by the end of the year, the EIA said.
Crude for August delivery rose 39 cents, or 0.4 percent, to $103.53 a barrel on the New York Mercantile Exchange today, the highest settlement since May 2, 2012. Brent oil for August settlement gained 38 cents, or 0.4 percent, to end the session at $107.81 on the London-based ICE Futures Europe exchange.
“The price discount of West Texas Intermediate crude oil to Brent oil, which was more than $23 per barrel in mid-February, fell below $5 per barrel in early July,” Adam Sieminski, the administrator of the EIA in Washington, said in a statement. “EIA expects the WTI discount to begin widening again, to $8 a barrel by the end of 2013” as production in Alberta recovers and output keeps growing in the central U.S.
Oil production outside of OPEC will rise 2.3 percent from 2012 to 53.94 million barrels a day this year, led by gains in the U.S. and Canada. The 2013 output projection was increased 30,000 barrels from June’s report.
U.S. production is projected to climb 7.9 percent this year to 12.01 million barrels a day, a total that includes oil, natural gas plant liquids, biofuels, other liquids and refinery processing gains. Production will advance 6.8 percent next year to 12.83 million, the EIA predicted. Output of crude is forecast at 7.31 million in 2013 and 8.09 million in 2014.
“After U.S. crude oil production reached 7 million barrels a day at the end of last year for the first time in two decades, daily oil output is on its way to topping 8 million barrels by mid-2014,” Sieminski said.
The EIA increased its forecast for global oil consumption this year to 90.05 million barrels a day from 90.03 million estimated last month. Demand will climb to 91.29 million barrels a day in 2014, up from the June estimate of 91.22 million.
U.S. oil consumption will average 18.66 million barrels a day in 2013, up from last month’s forecast of 18.64 million. Next year demand is projected to climb to 18.69 million.
Demand from the 30 members of the Organization for Economic Cooperation and Development will average 45.53 million barrels a day this year, down from 45.97 million last year. The forecast increased 70,000 from 45.46 million last month. The prediction for 2014 is 45.35 million.
The OECD doesn’t include developing countries such as China, India and Brazil. The EIA reduced its forecast of consumption by non-OECD countries to 44.52 million barrels a day from 44.57 million last month. That would be a 3.1 percent gain from 43.2 million in 2012. Demand is expected to rise to 45.94 million next year.
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