The U.S. Energy Department increased crude-oil price projections for 2013 and forecast that global consumption will climb to a record.
West Texas Intermediate oil will average $89.54 a barrel this year, up 1.3 percent from the December projection of $88.38, the department said today in its monthly Short-Term Energy Outlook. The U.S. benchmark grade averaged $94.12 in 2012, less than the December estimate of $94.26.
Futures surged to $93.87 a barrel on Jan. 2 on the New York Mercantile Exchange, the highest intraday level since Sept. 19, following a budget compromise in Washington that averted most of the so-called fiscal cliff of spending cuts and tax gains. The Standard & Poor’s 500 Index also increased on the agreement, reaching a five-year high last week.
“Toward the end of the year, we had improving economic news and that continued during the first couple of weeks of the New Year, and the stock market has increased,” Adam Sieminski, the administrator of the EIA in Washington, said in a conference call. “We’ve noted in the report that there’s a correlation between moves in the financial markets and energy prices.”
Brent, the benchmark grade for more than half the world’s crude, will average $105.17 a barrel in 2013, up 1.4 percent from last month’s forecast. The average cost of domestic and imported grades used by U.S. refiners will be $94.27 a barrel in 2013, up 1.2 percent from the December projection of $93.11.
WTI will climb to an average $91 a barrel next year, while Brent will slip to $99.25 according to the report. This is the first edition of the outlook to have 2014 forecasts.
The spread between Brent and WTI, which will average $15.63 a barrel this year, will narrow to $8.25 in 2014. The Brent premium will shrink because increasing pipeline capacity will lower the cost of shipping oil from the central U.S. to refineries on the Gulf Coast, according to the report.
The department increased its forecast for global oil consumption this year to 90.11 million barrels a day from 90 million estimated last month. Demand will be 1.1 percent higher than last year’s average of 89.17 million. Global consumption will climb to 91.46 million in 2014.
Oil production outside of the Organization of Petroleum Exporting Countries will rise 2.7 percent to 53.89 million barrels a day this year, led by increases in the U.S. and Canada. That’s up from last month’s projection of 53.79 million. World output will climb an additional 2.4 percent to 55.19 million in 2014.
U.S. crude output rose 14 percent to an average 6.43 million barrels a day in 2012, the highest rate in 20 years, according to the report. The combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in states including North Dakota, Texas and Oklahoma.
“U.S. production averaged 6.4 million barrels a day in 2012 and is already higher,” Sieminski said. Further gains are “pushing us very close to 8 million barrels a day” in 2014.