- The Energy Information Administration has increased its forecast for U.S. oil production this year, projecting an increase of 720,000 barrels per day.
- While it expects U.S. oil production to increase, the EIA sees demand for crude in the U.S. weakening due to lower gross domestic product growth this year.
- Global oil demand is forecast to increase this year and next, with a majority of that growth coming from developing countries.
U.S. crude oil production could gain 720,000 barrels daily this year, up from a previously forecast growth rate of 640,000 bpd, according to the latest edition of the Energy Information Administration’s Short-Term Energy Outlook.
Demand for crude in the U.S., however, is expected to weaken, according to the EIA, because of lower consumption of distillate fuels. That expectation, in turn, is based on a projection for lower gross domestic product growth this year.
According to the EIA, the U.S. economy will only expand by 1.3% this year, slowing down further to 1% in 2024. That’s a downward revision from the previous edition of the STEO, when the EIA predicted economic growth of 1.6% for this year and 1.8% for next year.
Distillate fuel consumption in the United States is already down due to the prolonged slowdown in manufacturing activity. Earlier this month, the Institute for Supply Management reported that U.S. manufacturing and freight activity had declined for the seventh consecutive month in May, which means it is officially in a recession.
This, in fact, has pushed energy consumption lower, including distillate fuels and electricity for industrial consumers. Reuters noted in a report that distillate fuel consumption in the U.S. was down by over 3% in the first quarter of the year, too.
At the same time, however, the EIA expects gasoline and jet fuel consumption to increase this year. This will account for part of the expected increase in liquid fuel demand, which will be led by propane and ethane, the EIA also said in its report.
The agency also forecast that global oil consumption this year will rise by 1.6 million barrels daily, to hit 101 million bpd. Consumption will continue climbing higher next year as well, the EIA predicted, adding another 1.7 million bpd, most of it in developing countries.