U.S. Energy Information Administration this week reduced its 2019 Brent crude oil price forecast to $63 per barrel – $2 per barrel lower than forecast last month. In its Sept. 10 report, the EIA said, “The lower 2019 price forecast largely reflects recent global crude oil price fluctuations and lower forecast global oil demand growth.” And EIA now expects that annual average Brent prices will decrease in 2020 to $62 per barrel – $3 per barrel lower that forecast last month.
The Brent-WTI futures price spread settled at $4.79 per barrel Sept. 5, a decrease of $1.70 per barrel since Aug. 1. The price spread had decreased to $3.60 per barrel Aug. 19, the narrowest spread since March 2018. Crude oil prices in Permian Basin increased during this period with the addition of two pipelines that reduced takeaway constraints to the Gulf Coast. Cactus II pipeline added about 670,000 b/d, and EPIC Midstream NGL pipeline – repurposed to deliver crude oil – added about 400,000 b/d of capacity.
The pipeline additions between Permian Basin and Gulf Coast reduced the need for crude oil to first transit through Cushing, Okla., lowering the cost of transportation to refineries and export terminals. Cushing crude oil stocks decreased by 10 million barrels from the third week of July to Aug. 23 likely because of less crude oil flowing to the storage hub from Permian Basin. EIA expects the spread to widen slightly from the lows seen in mid-August as regional markets rebalance.