MNI: EIA Sees Oil Stable Despite Middle East Tensions

The U.S. Energy Information Administration expects oil production to be relatively unfazed by Middle East tensions so far, but prices are still seen rising later this year before receding modestly in 2025, the agency told MNI.

EIA said there hasn’t been a physical disruption to crude oil or refined product production to date, but tensions increase the risk of a disruption and can result in market participants taking action to hedge physical or financial losses.

The statistical agency's crude oil price forecast is relatively flat on an annual average basis -- it expects Brent to climb to USD85 per barrel in the first quarter of this year from the current USD80, then gradually fall to USD78 per barrel by December 2025, EIA said in response to emailed questions. The estimates are driven by relatively large inventory drawdowns this quarter, followed by mostly balanced markets and some stock builds that will push prices down by the second half of 2025.

The relatively minimal price changes in the EIA forecast is due to continued OPEC+ production restraint, below the pre-pandemic average of 40.2 million b/d at an average of 36.4 b/d this year and 37.2 million b/d in 2025. EIA expects OPEC+ to make cuts from its currently stated targets this year. (See MNI INTERVIEW: Oil Oversupplied Amid Sagging Demand-Dallas Fed)

NAT GAS EXPORTS

Natural gas prices on the other hand are expected to rise over the next two years because demand from consumption and exports are seen rising more than supply in both years. This year, an increase in LNG exports will be the main contributor to that, but the EIA also expects increases in domestic consumption of natural gas to contribute to a higher Henry Hub price.

A major source of uncertainty in the EIA forecast is weather. More recently, Henry Hub has declined to its lowest since mid-December on milder weather and above-average gas storage levels.

On the LNG front, EIA sees the timing of new export capacity coming online as a key risk to their forecast. In 2024 and 2025, three new U.S. LNG export projects—Golden Pass, Plaquemines, and Corpus Christi Stage III—are expected to start LNG exports, but the expected online dates of these projects are volatile and have shifted since developers started construction.