Crude oil prices rose sharply in March, due not least to the sanctions imposed on Russia. Russia is an important supplier to the world market. BRENT prices, therefore, rose to over $140 per barrel for a short time, after averaging $97 per barrel in February. According to the EIA, the rising price trend is also due to falling global oil inventories, which have been steadily declining since mid-2020. According to the report, crude oil inventories are expected to have declined by an average of 1.8 million barrels per day from the third quarter of 2020 through the end of 2021. Inventories are expected to have fallen even further in the first two months of 2022, bringing OECD commercial inventories to 2.64 million barrels at the end of February, the lowest level since mid-2014.
In its near-term energy outlook, EIA projects Brent prices to average $117 per barrel in March and $116 per barrel in the second quarter of 2022. In the second half of the year, the market is expected to ease and average $102 per barrel. However, the EIA points out that the outlook is very shaky, as the price forecast depends mainly on the extent of sanctions imposed on Russia and whether more sanctions will be added in the future. In addition, crude oil inventories are expected to recover and increase by an average of 0.5 million barrels per day from the second quarter of 2022 to the end of 2023.
U.S. crude oil production reportedly fell below 11.6 million barrels per day in December 2021, but average production is expected to rebound to 12 million barrels per day in 2022. Production is then expected to rise to a record 13 million barrels per day in 2023, an increase from 2019 when average crude oil production was 12.3 million barrels.
Crude oil prices are expected to boost U.S. gasoline prices to an average of $4.10 per gallon and diesel prices to an average of $4.43 per gallon in the second quarter of 2022.