The Short-Term Energy Outlook released on November 10 forecasts average North Sea Brent crude oil prices of $54/barrel (b) in 2015 and $56/b in 2016. Forecast West Texas Intermediate (WTI) crude oil prices average $4/b lower than the Brent price in 2015 and $5/b lower in 2016. Current values of futures and options contracts continue to suggest high uncertainty in the price outlook (Market Prices and Uncertainty Report). Based on contracts traded during the five-day period ending November 5, the lower and upper limits of the 95% confidence interval for the market's expectation of monthly average WTI prices are estimated at $35/b and $66/b for February 2016 widening to $28/b and $95/b for December 2016 (Figure 1). Key market uncertainties include the pace and volume at which Iranian oil reenters the market, the strength of oil consumption growth, and the responsiveness of non-OPEC production to low oil prices.
Global petroleum and other liquids production continues to outpace consumption, leading to inventory expansion throughout the forecast period. However, the current average price forecast for Brent crude oil in 2016, which is $2/b lower than in last month's outlook, is associated with a further reduction in the outlook for supply growth that in turn reduces the surplus of supply over consumption. Global oil inventory builds in the third quarter of 2015 averaged 1.6 million b/d, down from 2.0 million b/d in the second quarter, which had the highest level of inventory builds since the fourth quarter of 2008. The pace of inventory builds is expected to slow in the fourth quarter to roughly 1.2 million b/d. In 2016, inventory builds are expected to slow further to an average of 0.4 million b/d as global liquids output is expected to be unchanged from 2015. The 0.4 million b/d reduction in projected 2016 inventory builds from last month's STEO mostly reflects lower forecast oil production in Canada and the United States.