The price of crude oil is forecast to fall in the first half of this year, according to a new report.
The US Energy Information Administration (EIA) forecasts Brent crude oil spot price will average $65 (£50) per barrel (b) in 2020 and $68 (£52)/b in 2021.
The West Texas Intermediate (WTI) spot is expected to average $59 (£45)/b in 2020 and $62 (£47)/b in 2021.
Monthly average Brent prices rose from $63 (£48)/b in September to $67 (£51)/b in December last year.
The report states: “EIA expects that crude oil prices will remain elevated in the first few months of 2020, reflecting a price premium on crude oil from recent geopolitical events. However, this price premium will diminish in the first half of 2020 and market fundamentals will drive the crude oil price forecast in the second half of 2020 and in 2021.”
Some of the geopolitical events include attacks on oil tankers transiting the Persian Gulf and the Red Sea, the attack on Saudi Arabia’s energy infrastructure last September and recent tensions between the US and Iran.
The EIA adds: “Further increasing the geopolitical risk premium on global oil prices, the US military action in Iraq in January 2020 increased uncertainty about potential disruptions to oil production and shipping in the Middle East. Following these developments, the price of Brent crude oil reached $70/b but prices have subsequently fallen.
“As the risk premium decreases, EIA assumes that Brent prices will decline in early 2020 to an average of $62/b in May. EIA does not forecast supply disruptions and any physical supply disruptions would put upward pressure on prices.”