Oil Price Forecasts: DoE EIA vs. Futures

Forecast as of 3 March, and confidence intervals implied by options.

Source: EIA, accessed 3/10/2022.

As of today, futures still indicate a decline over time.

Figure 1: Price of WTI, $/bbl (black), spot price as of 3/7 (gray+), NYMEX futures as of 2pm 3/10 (blue line). Source: EIA via FRED, NYMEX via ino.com, NBER.

On average, futures outperform a random walk and simple time series models like an ARIMA (see Chinn-Coibion, 2014).

32 thoughts on “Oil Price Forecasts: DoE EIA vs. Futures

  1. Anonymous

    I have been following the STEO for years. EIA has their own price deck, but it ends up approximating the EIA futures. Usually a small amount higher, for what that is worth, but close. And both tend to be different than the gushy stuff you hear from CNBC and Bloomberg and the like.

    There’s a tendency of a sort of “mean reversion” in the strip. After a big spot/prompt increase, the further out months will be backwardated. After a big decrease, the strip will be in contango. This is the exact opposite of the “momentum investor” style of news chatter we always get from journalists and fluffy analysts.

    Or putting it another way (and this is easily verified mathematically), the far out strip is less volatile than the prompt. (Not immediately less volatile, the CI is actually larger as you go out. But if you look from year to year and compare the DECYY+2 with say the ACTUALYY.)

    1. Menzie Chinn Post author

      Anonymous: Agree there is reversion, probably more pronounced on average after big up or down moves. Despite this, futures at 3 to 12 months ahead are more accurate than random walk or ARIMA(1,1,1) – or pretty much any other estimated model.

        1. rsm

          If backwardated, why can’t momentum traders just sell near months high and buy out months low, to keep spot rising?

  2. Gregory Bott

    If the Saudi’s were secretly behind this invasion of Ukraine, in some manner, it would not surprise me.
    1.China will buy more Russian oil
    2.Iran will provide Europe with oil
    3.Less Saudi concentration into Asia means more love for the good ole USA=
    7: Saudi’s get exactly what they want. Prices end up at value meaning no dirty oil=higher US imports of sweet crude and lower exports of that dirty oil.

    Even if Putin is going to be deposed in the coming weeks, it means little for the Saudi’s in the end. They will be friends with the next strong man. Oh, what tangled webs we lead.

    1. pgl

      MBS is a butcher but somehow I do not think even he endorses Putin the pig. But yea – Saudi Arabia is profiting from this mess.

      1. T. Shaw

        News Flash:

        Sleepy Joe’s handlers have Vlad the Invader’s henchmen negotiating with Iran for him on the new, improved Iran treaty.

        1. Barkley Rosser


          Actually you are out of it on this one. Putin now sandbagging the deal, demanding that no sanctions be imposed on Russian trade with Iran for the deal to go through. The deal could still be signed, but Russia is a part of it, taking in Iran’s excess enriched uranium.

          Clearly the Russians want to scuttle the deal because they do not want more Iranian oil on the market, holding down the oil price increases.

          Why and how is it that you missed this? Too much Fox News watching? The “Sleepy Joe” remark suggests that, given that Hannity pushes that line even as it has become clear that it is pretty ridiculous.

  3. pgl

    Putin has been spreading lies that the US has secret bioweapon labs in Ukraine. Putin pet poodle Tucker Carlson repeated this vile lie. Poor Tucker – during the next hour on Faux News Jennifer Griffin called out this lie:


    Look – Tucker is a traitor. That Faux News has not fired this little weasel by now is beyond explanation.

    1. Anonymous

      c’mon man, please!

      still working to demilitarize labs since 1993! how long does it take?

      the nukes were moved out and demil’ed or disassembled with usa help by mid 1990’s. dtra money flowed to doe and dot as well as dod. i know civilians who went to aid shipment etc.

      10 to 12 years later, the 2005 act enlarged the time to demil?

      the scientists working those labs are nearing 70, unless dtra paid for new blood.

      details of what dtra ordered and what they got to justified payment is easily delivered, unless it is classified to keep the public in the dark…..

      tucker is not refuted,

    2. Bruce Hall

      Newsweek attempts to cover the history and US involvement in Ukrainian laboratories.

      US Embassy in Ukraine official statement about the U.S. Department of Defense’s Biological Threat Reduction Program in Ukraine.

      US State Department statement regarding Russian allegations about Ukraine laboratories.

      One cannot conclude if the Russians are merely paranoid, if the Russians are projecting what they would be doing on the US and Ukrainians, or if the US presence in Ukraine is perceived by the Russians as “evidence” that the laboratories serve a nefarious purpose. If the Russians were involved in a network of laboratories in Venezuela or Cuba or even closer to home in Mexico, the US might have a similar reaction. That doesn’t mean the Russians are correct or even that they are not just fabricating concerns for propaganda purposes. It simply means that the US presence has given the Russians an opportunity to voice their conspiracy theory.

      1. pgl

        “Biological Threat Reduction Program”

        The title of your second link. Read on – this is NOT a program to create weapons of mass destruction. Putin pays you for disinformation we know. But damn – he is paying for someone who cannot even bother to read the title of a link? Could someone call Putin and tell him to hire better parrots?

        1. Bruce Hall

          Lucy, you are pretty selective in picking out four words from an entire comment… and out of context, too.

          So do you disagree with my statement or not? Come on, Lucy. Quit hiding behind parsing and twisting words. The issue is not what official US statements say the situation is, but rather what the Russians believe or not believe or simply want to, you know, parse and twist words. You didn’t respond to how the US would react to the Russians running a “Biological Threat Reduction Program” in Mexico.

          What you or I believe to be the truth of the matter is pretty irrelevant to global politics and how it plays out. By having a joint US-China biological effort in Wuhan where the COVID virus is thought to have originated has given fertile ground for those who want to connect those dots. The US presence in Ukraine for 17 years to “reduce biological threats” might seem peculiar to someone who asks the question, “Why has it taken so long?” Also, “What threats have required 17 years to contain?”

          No, I’m not saying that the Russians are correct. I’m saying that there can be legitimate questions that give the appearance of the Russians being correct.

          1. pgl

            Lucy? Listen old [edited MDC] pervert. I am a guy but if I were a lady, I certainly would not go out with such a whiny little troll. I point out your stupiidty and your treason and you accuse me of twisting your words? Grow up little old pervert.

          2. pgl

            “rather what the Russians believe”

            Putin does not believe the BS he is peddling. He is a known liar and war criminal. Now maybe there is some old country boy type in Russia who buys his lies. After all – people like you who watch Faux News believe Trump was a brave and wise President.

          3. Bruce Hall

            Putin does not believe the BS he is peddling.

            Well, I’ll just have to believe you since you just came back from his dacha and had all of those long night conversations. Thanks for the great insight.

          4. pgl

            “Lucy? Listen old [edited MDC] pervert.”

            OK our host is right that I went over the line here but come on – Brucie’s constant referral to me as “Lucy” is not beyond weird. After all perverts come in many colors and I do not even wish to speculate WTF is in this troll’s sick mind.

            I would have banned Bruce for his constant endorsements of Putin’s aggressions and lies. But that’s me. But there is something very sick about brucie’s Lucy references. I don’t want to even guess what is wrong with this weirdo but can this sickness be banned?

      2. pgl

        I guess Putin’s parrot failed to read his 3rd link as well:

        “The Kremlin is intentionally spreading outright lies that the United States and Ukraine are conducting chemical and biological weapons activities in Ukraine. We have also seen PRC officials echo these conspiracy theories. This Russian disinformation is total nonsense and not the first time Russia has invented such false claims against another country. Also, these claims have been debunked conclusively and repeatedly over many years. As we have said all along, Russia is inventing false pretexts in an attempt to justify its own horrific actions in Ukraine. The United States does not own or operate any chemical or biological laboratories in Ukraine, it is in full compliance with its obligations under the Chemical Weapons Convention and Biological Weapons Convention, and it does not develop or possess such weapons anywhere. It is Russia that has active chemical and biological weapons programs and is in violation of the Chemical Weapons Convention and Biological Weapons Convention. Finally, Russia has a track record of accusing the West of the very crimes that Russia itself is perpetrating. These tactics are an obvious ploy by Russia to try to justify further premeditated, unprovoked, and unjustified attacks on Ukraine. We fully expect Russia to continue to double down on these sorts of claims with further unfounded allegations.”

        Very clear and accurate and totally at odds with the spin Brucie Boy put in this. Come on Bruce – we already knew you are stupid. Psst – if Putin figurers this out, you are toast.

        1. Bruce Hall

          Yes, Lucy, that is the official line. We’d all like to accept that. Now, answer this: what has the US actually been doing in Ukraine for 17 years? I’m going to guess that the only answer you can give is, “I don’t know.”

          Could the US be testing counter-measures to what it thinks the Russians are doing? That would mean the US would have to have the bio-weapon in order to test the counter-measures. Maybe the US has to have its own biological testing program.

          Oh, and since you excoriated me for not using Wikipedia, I’ll offer this to you:

          Current (post-1969) bio-defense program[edit]
          Main article: United States biological defense program
          Both the U.S. bio-weapons ban and the Biological Weapons Convention restricted any work in the area of biological warfare to defensive in nature. In reality, this gives BWC member-states wide latitude to conduct biological weapons research because the BWC contains no provisions for monitoring or enforcement.[78][79] The treaty, essentially, is a gentlemen’s agreement amongst members backed by the long-prevailing thought that biological warfare should not be used in battle.[78]

          After Nixon declared an end to the U.S. bio-weapons program, debate in the Army centered around whether or not toxin weapons were included in the president’s declaration.[32] Following Nixon’s November 1969 order, scientists at Fort Detrick worked on one toxin, Staphylococcus enterotoxin type B (SEB), for several more months.[32] Nixon ended the debate when he added toxins to the bio-weapons ban in February 1970.[28] The U.S. also ran a series of experiments with anthrax, code named Project Bacchus, Project Clear Vision and Project Jefferson in the late 1990s and early 2000s.

          In recent years certain critics have claimed the U.S. stance on biological warfare and the use of biological agents has differed from historical interpretations of the BWC.[80] For example, it is said that the U.S. now maintains that the Article I of the BWC (which explicitly bans bio-weapons), does not apply to “non-lethal” biological agents.[80] Previous interpretation was stated to be in line with a definition laid out in Public Law 101-298, the Biological Weapons Anti-Terrorism Act of 1989.[81] That law defined a biological agent as:[81]

          any micro-organism, virus, infectious substance, or biological product that may be engineered as a result of biotechnology, or any naturally occurring or bioengineered component of any such microorganism, virus, infectious substance, or biological product, capable of causing death, disease, or other biological malfunction in a human, an animal, a plant, or another living organism; deterioration of food, water, equipment, supplies, or material of any kind …
          According to the Federation of American Scientists, U.S. work on non-lethal agents exceeds limitations in the BWC.[80] During the 2022 Russian invasion of Ukraine, the Russians claimed that they had come across US-run labs in Ukraine that were developing biological weapons such as the plague, anthrax, and cholera. The US dismissed the allegations as propaganda, claiming the labs focused on preventing the outbreak of infectious diseases and developing vaccines.[82] While being questioned in Congress, US diplomat Victoria Nuland expressed concern that the research materials in the labs would fall into Russian hands.[83]

          1. pgl

            Bruce Hall the [edited MDC] pervert dismisses reality as the “official line”?! Oh yea – he used to work for Kelly Anne Alternative Facts Conway. Maybe she should buy this pervert a blow up doll named Lucy.

          2. pgl

            “since you excoriated me for not using Wikipedia”

            No dumbass – I mocked you for thinking Wikipedia was a reliable source. No wonder no one named Lucy will go out with you. You are reallly DUMB!

          3. pgl

            Bruce Hall knows how to cut and paste from Wikipedia but he is incapable of checking sources that are clearly documented. Note a key passage in this Wikipedia rant was footnote 82. Since the lying troll Bruce Hall did not provide a link to this discussion, permit me


            Now Bruce – I get you are still trying to sexually harass some old lady named Lucy but do take the time to read this discussion as it undermines the lies from Putin which you so dutifully echo.

          4. Bruce Hall

            No dumbass – I mocked you for thinking Wikipedia was a reliable source. No wonder no one named Lucy will go out with you. You are reallly DUMB!

            Uh, no. You mocked me for NOT using Wiki. I stay away from that as a generally unreliable source since anyone, regardless of political bent, can edit the contents to their hearts desire. What you linked to regarding oil production may have been good data, but that was not relevant to my comment which was about Russian oil exports.

            Give it up, Lucy. You can’t be shrieking from both sides of the argument.

    1. pgl

      Thanks for this review even though JohnH will whine that it did not appear on the front pages of the NYTimes. I did a word count for monopsony which Princeton Sgteve has declared to be a banned word. 76 hits – those Communists!

    2. pgl

      This review sort of ties to Manzie’s latest on real wages. A 20% increase on top of $25 an hour would translate into $30 an hour. That would be nice!

  4. Anonymous

    By the way, container rates are flying again, mostly in response to bunker fuel costs. Some forecasting for Long Beach suggests lengthening cues, limited mostly by the shortage of container ships rather than by clearing containers from the port. That has not been the case recently. Cues are shorter this month than last. Don’t know what the forecast model looks like.

  5. Steven Kopits

    Once again, a misuse of statistics. Note that the EIA graph suggests implies on 1-2% chance of oil prices over $160 this year. A loss of 8 mbpd of supply could easily take oil prices above that level; indeed, JP Morgan has floated prices of $185.

    Statistics should only be used when the law of large numbers applies, that is, where probability of future events is related to the occurrence of historical events. A war like this is a one-off or a near one-off, and events depend upon the discrete and discretionary decisions of basically two individuals, Putin and Biden. The law of large numbers does not apply.

    If you are willing to sell a CY 2022 WTI future for $160 at a price implying a 2% probability of a call, you are absolutely crazy. The risk is comfortably ten times that high.

  6. Michel Lepetit

    I have been working on oil price forecast methodology by central banks (Fed ; BoE ; ECB) for a long time.
    Those interested, please contact me.
    As oil price futures provided by the financial markets are the main methodology of oil price forecasting by central banks, it means that inflation forecasts by them are fundamentally biased.
    James, it would be great if you could analyse that bias.
    Michel Lepetit

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