US Energy Information Agency Lowers 2016 Oil Price Forecast by Quarter

The United States Energy Information Administration (EIA) has revised its 2016 oil price forecast down by over one fourth in its short-term energy outlook.

MOSCOW (Sputnik) — According to the report released on Tuesday, Brent crude prices are forecast to average at $40 per barrel in 2016. This is 29 percent below its previous forecast of $55.78 per barrel. West Texas Intermediate (WTI) crude prices are expected to hover around $38 per barrel this year, the EIA said.

The report also provided forecasts into 2017, with average Brent crude prices rising to $50 per barrel and WTI averaging at $47 per barrel.

Prices are also expected to be volatile throughout 2016, the agency said, predicting WTI price range to be between $25 and $56 per barrel in April and between $22 and $82 per barrel in December.

The EIA has attributed the continuously depressed crude prices to the ongoing glut in global supply, citing the recent decision by the Organization of the Petroleum Exporting Countries (OPEC) cartel to maintain output in favour of retaining market share. Iran's expected entry into the world's energy markets after the lifting of international sanctions against the country is also set to contribute to the downward pressure on global oil prices, the agency noted.

Oil inventories will rise further in 2016, according to the EIA, offsetting any upward pressures on prices. With current Organization for Economic Co-operation and Development (OECD) stocks at 3.06 billion barrels (66 days of consumption), the figure has been forecast to rise to 3.13 billion by the end of 2016.

Brent crude prices plunged from $115 per barrel to $48.5 per barrel between June 2014 and January 2015, hitting the lowest levels since 2004 by January 2016. Early December, OPEC's summit resolved to make no changes to its 30-million-barrel daily production quota. The cartel also continues to exceed its quota, producing 31.6 million barrels per day in 2015, a figure expected to rise by 0.7 million barrels per day in 2016.