The U.S. Energy Information Administration (EIA) cut its forecast for 2023 U.S. crude oil production by 50,000 barrels per day after the Organization of the Petroleum Exporting Countries (OPEC) and allies extended output cuts through 2024.
Crude oil production is expected to rise 670,000 barrels per day (bpd) to 12.56 million bpd this year, less than a prior forecast calling for a gain of 720,000 bpd, the EIA said on Tuesday in its Short Term Energy Outlook.
The production cuts by OPEC+ were expected to lower global oil inventories in each of the next five quarters and boost global oil prices in late-2023 and early-2024, the EIA said previously.
The EIA now expects spot prices of Brent crude oil will average $78 a barrel in July, and crude oil prices will reach $80 a barrel in the fourth quarter of 2023.
Brent futures were last up 2% at $79.34 a barrel on Tuesday.
The International Energy Agency (IEA) has said the oil market should remain tight in the second half of 2023, citing strong demand from China and developing countries combined with recently-announced supply cuts including by top exporters Saudi Arabia and Russia.
Meanwhile, demand for oil in the United States and globally is expected to increase.
OPEC Secretary General Haitham Al Ghais said Tuesday that global demand for all forms of energy is forecast to rise by 23% through 2045.
The EIA projects U.S. total petroleum consumption, a proxy for demand, will rise by 100,000 bpd to 20.4 million bpd this year, and another 400,000 bpd to 20.8 million bpd in 2024.
The IEA will publish new forecasts this week.
The United States is forecast to use a record high amount of natural gas for electricity generation in July and August as high temperatures push up demand for air conditioning, the EIA said on Tuesday. The EIA expects about 4% more U.S. electricity generation from natural gas in July and August 2023, versus the same months in 2022.
The EIA forecasts Henry Hub prices will average more than $2.80 per million British Thermal Units (MMBTU) in the second half of 2023, up from $2.40/MMBTU in the first half of the year.
(Reporting by Laura Sanicola and Shariq Khan, additional reporting by Stephanie Kelly; Editing by Emelia Sithole-Matarise)