The U.S. Energy Information Administration increased its West Texas Intermediate crude price forecast for 2013 after prices surged in July.
WTI, the grade traded in New York, will average $96.96 a barrel this year, up from the July projection of $94.65, the EIA, the Energy Department’s statistical unit, said today in its monthly Short-Term Energy Outlook. The U.S. benchmark grade will average $92.96 in 2014, up from the previous month’s estimate of $91.96.
The EIA forecast that Brent, the benchmark grade for more than half the world’s oil, will average $105.80 a barrel in 2013, up $1.12 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 $103.06 a barrel this year, up $2.41 from the July estimate of $100.65, and $98.43 next year.
“Projections were changed because oil prices surged in the first three weeks of July,” said Tancred Lidderdale, an economist with the EIA in Washington who helped write the report. “Prices climbed more than we forecast.”
Crude for September delivery fell $1.12, or 1.1 percent, to $105.44 a barrel at 12:37 p.m. on the New York Mercantile Exchange. WTI climbed 8.8 percent in July. Brent oil for September settlement slipped 58 cents, or 0.5 percent, to $108.12 on the London-based ICE Futures Europe exchange.
The forecast spread between Brent and WTI is about $9 a barrel for 2013, down from last month’s projection of $10. The spread, which surged to a monthly average of $21 in February, fell to an average $3 In July. The WTI discount should widen to $6 by the end of the year, the EIA said.
Falling inventories at Cushing, Oklahoma, the delivery point for New York futures, helped spur July’s rally and reduce the gap between WTI and Brent, Lidderdale said. Supplies at the hub dropped to 42.1 million barrels in the week ended July 26, the least since April 20, 2012, EIA data show.
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.
“The spread between WTI and Brent has come in a great deal because of what’s occurred in the midcontinent over the last couple of months,” Lidderdale said. “This has contributed to a draw at Cushing the size of which we haven’t seen in quite awhile.”
U.S. crude production jumped to an average 7.5 million barrels a day in July, the EIA said. The agency forecast output of 7.4 million in 2013 and 8.2 million in 2014, both about 100,000 barrels a day higher than last month’s forecast.
Crude output in July was “the highest for any month since 1991,” Adam Sieminski, the administrator of the EIA, said in a statement. “EIA expects that U.S. monthly crude-oil production will exceed U.S. crude-oil imports as early as October, the first time this will have happened since February 1995.”
The department decreased its forecast for global oil consumption this year to 89.99 million barrels a day from 90.05 million estimated last month.
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