EIA Revises its Forecasts Following OPEC+ Announcement of Oil Production Cuts

In its April Short-Term Energy Outlook (STEO), the United States Energy Information Administration (EIA) increased its forecast for the 2023 Brent crude oil price by 2.5% from its previous forecast. This change came after OPEC and its partner countries (OPEC+) announced crude oil production cuts for 2023. EIA expects the Brent crude oil spot price to average $85 per barrel in 2023, $3 per barrel higher than its March forecast.

Despite OPEC+ announcing it would cut crude oil production by 1.2 million barrels per day through the end of this year, EIA expects 2023 global production of liquid fuels — which includes gasoline, diesel and jet fuel — to exceed 101 million barrels per day for the first time.

“The OPEC+ production cut is certainly significant, but we expect growing global production, especially in North and South America, to offset those cuts,” said EIA Administrator Joe DeCarolis. “We expect that world oil production and demand for petroleum products will be relatively balanced this year. The biggest risk to our April forecast is slower-than-expected economic growth, which would limit growth in demand for fuels such as gasoline and jet fuel.”

EIA expects U.S. gasoline prices to average around $3.50 per gallon (gal) this summer, peaking between $3.60/gal and $3.70/gal in June. EIA estimates that U.S. gasoline production will increase more than gasoline consumption in 2023, which would result in higher gasoline inventories, lower prices, and higher exports compared with 2022.

The agency released an additional supplement examining alternative scenarios for summer gasoline prices in the United States, including how the cost of gasoline factors into how much households spend on gasoline.

“Across the oil price cases we examined, our models still showed average U.S. household gasoline expenditures remaining lower than last year,” DeCarolis said.

EIA expects U.S. electricity generation from coal will be about 17% lower this spring than in the spring of 2022. About 5% of U.S. coal-fired electric-generating capacity retired over the past 12 months. Natural gas prices are also lower than at this time last year, which EIA expects will make coal less economical for electricity generation this spring.

“Lower natural gas prices and growing generation from renewable sources should reduce costs for generating electricity this summer compared with last summer,” DeCarolis said.

The full April 2023 STEO is available on the EIA website. EIA also published a “Between the Lines” supplement examining growth in liquid fuels production outside of OPEC countries.