US refiners count cost of lower crude prices

Since early December, oil prices have been moving in a narrow band with Brent crude hovering between $60 and $62 per barrel. Lower price forecasts continue from financial advisers and international organizations.

In its Short-Term Energy Outlook, the US Energy Information Administration ( EIA) lowered its price forecasts for WTI to $54.19 on average in 2019, down $10.66 from its last projection. It also predicts Brent will average $61 in 2019, down $10.92 from last month’s forecast.

However, the EIA’s downward adjustment is based mainly on record global output, particularly in the US — and lower-than-expected demand isn’t well justified. The EIA forecasts US oil production to average 10.88 million barrels per day ( bpd) in 2018, up from 9.35 million bpd in 2017, and then climb to 12.06 million bpd in 2019.

Last Monday, Libya’s National Oil Company (NOC) declared “force majeure” on oil exports from El Sharara oilfield. Production was halted after tribesmen and state security guards seized El Sharara and El Feel oilfields. About 400,000 barrels of crude per day have been lost as a result and production at the Zawiya refinery may be suspended. This news has yet to be reflected in global oil prices.

The lack of full government control over the oil supply in Libya justifies the exemption from output cuts agreed for the country during OPEC’s 175th ordinary meeting. Iran and Venezuela received similar exemptions. Many market participants were incorrect in concluding that the exemption could give Libya latitude to increase production beyond