Crude oil futures are cratering to their lowest levels in three months as the demand outlook dissipates and more supply comes to the market. Does this mean oil prices will continue to trade below $100 a barrel moving forward? Unless a severe supply disruption occurs, this could be the norm.
August West Texas Intermediate (WTI) crude futures crashed $8.55, or 8.21%, to $95.54 per barrel at 19:35 on Wednesday on the New York Mercantile Exchange. This is the lowest level since April. US crude has slumped nearly 20% over the last month, paring its year-to-date gain to under 27%.
Brent, the international benchmark for oil prices, has held steady. September Brent crude futures dipped $0.49, or 0.49%, to $99.00 a barrel on London’s ICE Futures exchange. Brent is down also about 19% over the last month, bringing the year-to-date to around 27%.
Although US crude output may be lackluster, foreign injections into global energy markets could help curb prices.
According to the Energy Information Administration’s (EIA) Short-Term Energy Outlook (STEO), US crude production is forecast to increase by 860,000 barrels per day to 12.77 million bpd next year. This projection was revised lower to 1.05 million bpd.
The EIA also predicted that total domestic petroleum consumption will rise to 700,000 bpd to 20.48 million bpd this year, down from the previous estimate of 750,000.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) forecasts that international oil demand will increase so much next year that it will be challenging to satisfy.
The cartel estimates that international crude demand could hit 32 million barrels per day by the end of next year, suggesting that the imbalance will be immense in 2023. The situation could intensify should Russian output decline by as much as three million barrels a day.
That said, the bullish demand expectation defies many other forecasts that consumption will diminish amid recession fears.
In other energy commodities, August natural gas futures tumbled $0.223, or 3.53%, to $6.092 per million British thermal units (Btu). August gasoline futures plunged $0.2081, or 6.01%, to $3.2541 per gallon. August heating oil futures dropped $0.1288, or 3.42%, to $3.6393 a gallon.