Short-Term Energy Outlook Crude Oil 

Price Forecasts

Independent Statistics & Analysis

www.eia.gov

U.S. Department of Energy

Washington, DC 20585

Last Updated 2020
U.S. Energy Information Administration | Short-Term Energy Outlook Crude Oil Price Forecasts i

This report was prepared by the U.S. Energy Information Administration (EIA), the statistical and 

analytical agency within the U.S. Department of Energy. By law, EIA’s data, analyses, and forecasts are 

independent of approval by any other officer or employee of the United States Government. The views 

in this report therefore should not be construed as representing those of the Department of Energy or 

other federal agencies.
U.S. Energy Information Administration | Short-Term Energy Outlook Crude Oil Price Forecasts 1

1. Introduction

In the Short-Term Energy Outlook (STEO), EIA’s forecasts for monthly average Brent and West Texas 

Intermediate (WTI) spot prices are calculated outside of the Short-Term Integrated Forecasting System 

(STIFS). The crude oil price forecast is one of the main determinants of the forecast for many of the 

petroleum price, consumption, and production variables within STIFS. Crude oil prices also affect a wide 

range of other non-petroleum forecasts produced by STIFS. 

EIA first formulates a forecast for Brent crude oil spot prices and then forecasts WTI spot prices by 

creating a forecast for the spot price spread between Brent and WTI. EIA considers three main inputs to 

determine its Brent price forecast:

• A pooling model that provides a single Brent price series that is an average of five separate 

models

• A linear regression using independent variables from the STEO forecast

• Analyst judgment based on an understanding of global oil market dynamics and EIA’s forecast 

for supply and demand balances

In sections three through five below, we discuss each of these inputs separately. 

2. Data sources

EIA purchases the underlying historical time series for Brent and WTI crude oil spot prices from Refinitiv 

(Thomson Reuters). With permission, EIA republishes these price series on our website. The STEO 

forecast reflects a monthly average price. For historical data, the monthly average price is calculated by 

taking a simple average of the daily closing prices for all trading days in the month (typically all 

weekdays excluding holidays). The spot price for Brent crude oil is based on physical delivery of crude oil 

in the North Sea in the United Kingdom. The spot price for WTI is based on physical delivery at the 

Cushing, Oklahoma, storage hub.

3. Pooling model

Each month, EIA runs a set of five real-time Brent crude oil price forecasting models. These linear 

regression models are based on historical data on economic and oil market activities:

• A vector autoregressive model

• A model based on the spread between oil futures prices and the spot price of oil

• A model using non-oil industrial commodity prices

• A model with a time-varying parameter representing the relationship between (a) the spreads 

between the U.S. spot prices of gasoline and heating oil and (b) the spot price of crude oil

• A model based on the cumulative change in U.S. crude oil inventories
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The pooled forecasts methodology EIA uses is discussed in Baumeister et al.1 The results of the five 

models are pooled using a simple average of the five results. 

4. Linear Regression

EIA also produces a Brent forecast using a linear regression model based on STEO forecast results. The 

regression equation models the month-to-month change in the Brent crude oil spot price based 

primarily on the following independent variables:

• Month-to-month change in U.S. petroleum inventories

• Total monthly petroleum inventories among countries in the Organization for Economic 

Cooperation and Development (OECD), relative to the previous four-year average inventories for 

that month

• Month-to-month change in global gross domestic product (GDP)

Inventory levels are a key driver of global crude oil prices. Because oil is storable, supply of oil in one 

period does not necessarily equal consumption. If supply in a month is more than consumption, oil 

inventories increase. If supply is less than consumption, oil inventories decrease. Sometimes these 

mismatches of supply and consumption represent normal seasonal fluctuations. However, because oil 

has a relatively low short-term price elasticity for both supply and demand, imbalances between supply 

and demand (including demand for inventories) can occur. The resulting inventory builds or draws can

reflect these market imbalances, which market participants perceive and act upon, putting downward or 

upward pressure, respectively, on oil prices. 

EIA uses the change in U.S. petroleum inventories as a proxy for supply and demand balance trends in 

the global oil market. U.S. petroleum inventory data reported in EIA’s Weekly Petroleum Status Report

are one of the most timely physical market indicators available to analyze oil price movements and to

represent trends in the world’s largest oil market. The United States accounts for about 20% of global oil 

consumption and production.

Because no reliable measure for global oil inventories is available, EIA uses OECD petroleum inventory 

levels to assess the level of storage in the global oil market. The International Energy Agency (IEA) 

reports total petroleum inventories in OECD member countries (almost half of global oil consumption in 

2019) with a two-month lag. Although less timely than U.S. data, OECD inventory data can still provide 

insight into levels of storage in other markets, particularly Europe and Japan. Much of the oil inventory 

data outside of the OECD, if it exists, is reported with enough of a time lag that it is less useful in a realtime, short-term forecasting model.

 1 Christiane Baumeister, Lutz Kilian, and Thomas K. Lee, Energy Economics, 46, December 2014, S33-S43
U.S. Energy Information Administration | Short-Term Energy Outlook Crude Oil Price Forecasts 3

5. Analyst judgment

Ultimately, EIA analysts formulate a Brent price forecast by expert judgment, using the output of the 

pooled and linear regression models as guides. EIA produces an initial global oil production and demand 

forecast using a price forecast based on a combination of three variables:

• Price forecasts from the pooled and linear regression models described in Sections 3 and 4 

above

• The previous month’s STEO price forecast

• Prices paid on the futures market

EIA then iterates price paths and resulting oil market balance outcomes to achieve a price forecast 

consistent with forecast global oil market balances.

5.1. Forecasting global oil demand

As noted in Section 4, global oil consumption and global oil production are, for the most part, relatively 

price inelastic over the STEO forecast period. Using international GDP forecasts from Oxford Economics, 

EIA produces a forecast for global oil consumption based primarily on assumptions of country-level GDP 

growth. Because global oil demand growth is relatively insensitive to price change, varying the price 

path will not change EIA’s forecast of global oil demand growth enough to meaningfully affect expected 

global oil market balances. Exceptions may occur in times of rapid and significant price changes.

5.2. Forecasting global oil production

EIA derives its forecast of global oil production from its forecasts of the following:

• U.S. crude oil production

• Organization of the Petroleum Exporting Countries (OPEC) crude oil production

• Non-OPEC, non-U.S. production

U.S. crude oil production is the most price sensitive part of EIA’s global supply forecast, particularly in 

the Lower 48 states region (L48). U.S. L48 crude oil production largely consists of tight oil production, 

which has a much shorter investment-to-production period than conventional oil projects. Because EIA 

research shows that changes in oil prices typically affect L48 crude oil production with about a six-month 

lag, the L48 production forecast is largely set for the first six months of the forecast horizon, based on 

prevailing prices at the time of the forecast. 

The non-OPEC, non-U.S. production forecast mostly reflects long lead time oil production projects, such 

as deep-water offshore or Canadian oil sands, which are typically publicly announced years in advance 

of realized production. Based on EIA analysis of decline rates at existing projects combined with EIA’s 

assessment of oil production projects that will come online, EIA develops a forecast for non-OPEC, nonU.S. oil production for the forecast period. In all but exceptional circumstances, the forecast does not 

change based on the price assumptions in the forecast. 

Given a forecast for global oil consumption and total non-OPEC production, EIA estimates the amount of 

crude oil that OPEC would have to produce to neither build nor reduce global oil inventories, commonly 
U.S. Energy Information Administration | Short-Term Energy Outlook Crude Oil Price Forecasts 4

called the call on OPEC crude oil production.

2 EIA creates a forecast of OPEC crude oil production based 

on stated OPEC policy and EIA analysts’ expectations of OPEC behavior. If OPEC produces more crude oil 

than the call on OPEC, global oil inventories will grow, and if OPEC produces less than the call, global oil 

inventories will fall. 

5.3. Estimating market balances and solving for equilibrium

The oil demand and production forecasts provide an initial forecast of oil market balances during the 

first six months of the forecast period. Next, EIA assesses whether these market balances fit with the 

price path that yielded those balances. EIA then iterates using various price paths. Because U.S. oil 

production is the most elastic part of the forecast, one exercise that is key to determining our price path 

is to look at forecast U.S. oil production in different scenarios and how the varying levels of production 

would affect global oil market balances.

In a simplified example, if EIA’s initial supply and demand forecasts result in significant inventory builds 

during the first six months of the forecast, that might indicate that downward oil price pressures could 

emerge during that period. So, EIA might then run a price path through our models with lower prices 

forecast for the first six months of the forecast period. However, if that price path leads to less U.S. 

crude oil production and tighter global oil market balances later in the forecast period, then that could 

indicate upward oil price pressures later in the forecast. This type of iteration might lead to a Brent price 

path where prices are falling during the early months of the forecast and then rising toward the end of 

the forecast period. 

5.4. Forecasting WTI prices

After EIA produces its Brent price forecast, EIA forecasts WTI prices based on analysts’ expectations for 

the spread between Brent and WTI monthly average spot prices. Although prices for global crude oils of 

similar quality tend to move together closely, differences between benchmark crude oils can arise 

because of various transportation costs and local infrastructure constraints. The price difference 

between two crude oils that are freely tradeable on global markets reflects the difference in cost of 

moving those crude oils to the refinery that represents the marginal point of consumption.

For example, in recent years, WTI and Brent crude oils have both been competitive in global export 

markets, and the price differences between the two crude oils have reflected the additional cost of 

exporting WTI to the marginal refiner, compared with Brent. Delivering crude oil into and out of Cushing 

has at times been subject to infrastructure constraints, including pipeline or storage capacity limitations, 

which can affect prices for WTI relative to Brent. Depending on the existing level of infrastructure, as 

well as planned infrastructure developments throughout the forecast period, EIA develops a Brent-WTI 

price spread forecast that reflects the reality of any existing infrastructure constraints and considers the 

point at which the price spread may settle at an equilibrium level.

 2 Call on OPEC crude oil production = global oil consumption – non-OPEC supply