Current Oil Prices
Crude oil prices are usually affected by seasonal supply and demand and global events. While the economic recovery from the pandemic is going well, oil prices continue to be influenced by global uncertainty and will reflect oil price forecasts this reality.
Current Oil Prices
There are two types of crude oil used as benchmarks for other oil prices: West Texas Intermediate (WTI) in Cushing and Brent crude in the North Sea. WTI crude from Cushing comes from the United States and is the benchmark for American oil prices. Brent crude from the North Sea comes from Northwestern Europe and is the benchmark for international oil prices.
Internationally, the average price of Brent crude oil is expected to reach $95.33/barrel in 2023, according to the Energy Information Administration (EIA) in its short-term energy outlook published in November 2022. This rises from the annual average of $70.89 in 2021 and $102.13 in 2022.
The average West Texas Intermediate oil price was $87.55 per barrel in October 2022. The Energy Information Administration expects WTI crude prices to average $87.33/barrel in 2023, compared to $95.88 in 2022.
Note: Oil prices are affected by several factors including everything from weather to economic and political instability.
Oil Price Forecasts from 2025 to 2050
The Energy Information Administration forecasts that the price of Brent crude oil will rise to $67 per barrel (in 2021 prices) by 2025. By 2030, global demand is expected to reach $79 per barrel. By 2040, prices are expected to reach $84 per barrel. By that time, cheaper oil sources will have been depleted, making oil extraction more expensive. By 2050, oil prices could reach $90 per barrel.
The price of West Texas Intermediate crude is expected to rise to $65 by 2025, reach $71 by 2030, $81 by 2040, and $87 by 2050.
The Energy Information Administration assumes that oil demand will converge with the increasing reliance on natural gas and renewable energy. It also assumes that the economy will grow at an annual rate of about 1.9%, while energy consumption declines by 0.4% annually.
Note: Future oil prices will greatly depend on innovations in energy, transportation, and other industries as societies work to eliminate dependence on fossil fuels.
5 Reasons for Daily Oil Price Volatility
Oil prices used to experience predictable seasonal volatility. They rise in spring as oil traders expect high demand for driving during the summer holidays. Once demand peaks, prices typically fall in the fall and winter seasons.
Global supplies and prices are also significantly affected by geopolitical conflicts and civil unrest.
Oil prices are more volatile today due to many factors, but five factors are the most influential:
Russian Invasion of Ukraine
Russia is the third-largest producer of liquid fuels and petroleum, so when the country invaded Ukraine in late February 2022, it had an immediate effect on Brent crude oil contract prices. As the conflict continued, crude oil prices settled on an upward trajectory, reaching nearly $130 a barrel in early March and remained above $100 a barrel until April.
U.S. Oil Supplies
The COVID-19 pandemic and natural events continue to affect oil demand and supply. The U.S. experienced a drop in production after Hurricane Ida, as the storm shut down at least nine refineries.
Estimates
The Energy Information Administration states that crude oil production in the United States will average 12.01 million barrels per day in 2022 and 12.95 million barrels per day in 2023.
OPEC Production Cuts
The increase in oil prices also reflects supply constraints from the Organization of the Petroleum Exporting Countries (OPEC) and OPEC partners. In 2020, OPEC cut oil production due to decreased demand during the pandemic. They gradually increased oil production throughout 2021 and into 2022. Supply chain disruptions at the end of 2021 also impacted global trade.
In its October 2022 meeting, OPEC announced it would cut oil production by 2 million barrels per day starting November 2022. This cut equals about 2% of global production.
Natural Gas
Countries in Asia relied on coal for energy generation, but the current coal shortage has pushed them to shift to natural gas. Rising temperatures in some parts of Asia and Europe have led to increased demand for natural gas for power generation.
As a result, natural gas prices rose in 2021 and remained high in 2022 as Russia halted its deliveries to Europe, and they are expected to stay high in 2023.
Reduction of Global Inventories
As global oil production continues to decline, countries will need to tap into their stored reserves (excluding strategic petroleum reserves). This continued use of oil contributes to rising prices as inventories decrease.
FAQs
What is crude oil?
Crude oil is a liquid found beneath the Earth’s surface. It is a mixture of hydrocarbons formed through the exposure of plant and animal organic materials to millions of years of heat and extreme pressure. Crude oil serves as a basis for many petroleum products, including plastics, fuels, and lubricating oils.
What is the process that converts crude oil into gasoline?
The refining process converts crude oil into products such as gasoline. One barrel of crude oil (42 gallons) produces about 19-20 gallons of gasoline, 11-13 gallons of diesel, and 3-4 gallons of jet fuel. Refineries also extract various chemicals and plastics from a barrel of crude oil.
How can you invest in crude oil?
There are several ways to invest in the oil industry, but the most direct way to invest in crude oil as a commodity is through futures contracts. You can also invest in an exchange-traded fund that mirrors your exposure to crude oil futures.
How many gallons are in a barrel of oil?
There are 42 gallons in each barrel of oil.
Source: https://www.thebalancemoney.com/oil-price-forecast-3306219
Leave a Reply