Oil, gasoline prices to fall more than forecast

The average price of domestic oil and gasoline will be less than previously forecast through the remainder of 2012 because of weak demand and increased world supplies, the U.S. Energy Information Administration said today.

The price of West Texas Intermediate crude, used as a benchmark for domestic oil, will be about $95 a barrel through the remainder of the year, $11 lower than projected last month, the administration said in its latest short-term energy outlook.

Gasoline prices will also be lower than previously forecast, down from $3.79 for a gallon of regular to $3.60, because of the decline in oil prices, according to the outlook.

WTI prices fell dramatically from $106 a barrel on May 1 to $83 on June 1 as concerns have grew about low oil demand in a weak world economy, the administration said.

“The recent economic and financial news that points towards weaker economic outlooks could lead to lower economic growth forecasts and further downward revisions to EIA’s crude oil price forecasts,” the Energy Information Administration said.

Oil production has outpaced consumption so far this year, with that trend expected to continue. Global oil and liquid fuels production is expected to be 1.2 million barrels a day more than current demand through the end of June, the EIA said.

North America is leading production growth among countries not in the Organization of Petroleum Exporting Countries, with the United States and Canada combining to generate an additional 890,000 barrels a day of oil and liquid fuels this year, the EIA said.

Most of the growth will come from shale, tight oil and oil sands plays, the agency said.
North America will add about 470,000 barrels a day of oil and liquid fuels production in 2013, according to the outlook.

Brazil is projected to add 20,000 barrels a day of production this year, while OPEC countries are expected to add about 900,000 barrels a day to the world supply, the EIA said.