Brent crude oil is expected to be an average of $60 per barrel in 2018 and $61 per barrel in 2019, up from the $54 per barrel average in 2017, according to the U.S. Energy Information Administration’s Short-Term Energy Outlook. Global crude oil production is expected to be greater than global consumption, and U.S. production is expected to increase more than any other country.
U.S. gasoline prices, along with oil prices, are expected to be flat through 2019, according to the EIA. The average regular retail gas price is expected to be $2.57 per gallon in 2018, and $2.58 per gallon in 2019, up from $2.42 per gallon in 2017.
The West Texas Intermediate (WTI) crude oil spot price is projected to be $55 per barrel in 2018 and $57 per barrel in 2019, or $4 per barrel and $5 per barrel, respectively, less than Brent prices. The price gap is expected to narrow from the $6 per barrel price difference in the fourth quarter of 2017 because existing capacity constraints to transport oil from Cushing, Okla., to the U.S. Gulf Coast are expected to decrease. The Cushing storage hub is the geographic location associated with the WTI price.
“As Asian demand for crude oil and petroleum products increase, supply considerations to transport crude oil to Asia are increasingly part of the price formation for global crude oil benchmarks,” according to the EIA. “EIA estimates that, absent significant pipeline constraints, moving crude oil from Cushing to the Gulf Coast typically costs about $3.50 (per barrel). Moving that crude oil from the United States to Asia costs approximately (50 cents per barrel) more than to ship Brent from the North Sea to Asia.” More export infrastructure has been built recently, but U.S. exporters use smaller, less-economic vessels and have more complex shipping arrangements that often add to the cost.
Global inventories of crude oil are expected to increase by 0.2 million barrels per day in 2018 and 0.3 million barrels per day in 2019. U.S. crude oil production is expected to be 10.3 million barrels per day in 2018 and 10.8 million barrels per day in 2019, surpassing the previous record production level of 9.6 million barrels per day in 1970.