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EIA forecasts 2021 US crude at 11.1M bpd
US natural gas expected to average 92.6 bcf per day this year, up 1.3%; electricity from hydro to drop 12% on western drought Kristen Nelson Petroleum News
The U.S. Energy Information Administration said July 7 in its Short-Term Energy Outlook for July that it expects global crude oil production to rise, largely from Organization of the Petroleum Exporting Countries and partners, reducing global oil inventory draws and keeping prices for this year “similar to current levels,” with a second half average of $72 per barrel.
Brent averaged $73 per barrel in June, up $5 from May and $33 higher than June of 2020.
Next year, EIA said, it expects continuing growth in production by OPEC+, accelerating U.S. tight oil production and other supply growth to “outpace growth in global oil consumption and contribute to declining oil prices,” which the agency expects to average $67 per barrel in 2022.
Henry Hub natural gas prices averaged $2.03 per million British thermal units in 2020 and EIA said it expects those prices to rise to an annual average of $3.22 per million Btu this year and then fall to $3 in 2022.
The July outlook remains subject to heightened uncertainty due to the ongoing economic recovery from the COVID-19 pandemic, with U.S. economic activity and increase in energy use continuing to rise after multiyear lows in the second quarter of 2020. EIA said this outlook assumes U.S. gross domestic product will grow by 7.4% this year and by 5% in 2022.
Electricity sales EIA said it is forecasting an increase of 2.8% in U.S. retail electricity sales this year, led by a 5.1% increase in the industrial sector with the commercial sector also growing, but just at 2.1% because many workers will continue to work from home.
“The increase in electricity sales to the industrial sector is a strong sign of rising levels of economic output as the COVID-19 pandemic recedes in the United States,” said EIA Acting Administrator Steve Nalley.
EIA expects that renewable energy will contribute a greater share of U.S. electricity generation through 2022, reaching 23%, up from 20% in 2020, with about 50 gigawatts of solar and wind capacity scheduled to come online in the next 18 months. 2022 is the first year that growth in solar capacity will outpace wind capacity growth, the agency said.
Hydropower generation in California and the Northwest is expected to be down by 11% this year because of weather conditions, and down 12% nationwide.
“The extreme drought in the Northwest and California is straining water reserves, which we expect to cause a significant decrease in electricity from hydropower this year,” Nalley said.
US production levels U.S. crude oil production is forecast to average 11.1 million bpd this year, down 200,000 bpd from 2020, EIA said, noting that annual numbers “somewhat obscure production trends,” with first quarter production this year down by more than 2 million bpd from the first quarter in 2020, “the quarter before 2Q20 when production fell sharply in response to falling oil prices.”
From the second through the fourth quarter of this year, however, U.S. production is expected to be up 400,000 bpd on average from last year and the agency is forecasting that U.S. crude production will average 11.9 million bpd next year.
Trends in Lower 48 production are expected to drive production levels, with most of that production - excluding the federal offshore Gulf of Mexico - tight oil. EIA said its growth forecast is based on West Texas Intermediate prices which “indicate a favorable environment for drilling activity.”
WTI averaged more than $70 per barrel in June for the first time since October 2018 and EIA said it expects WTI to remain above $60 per barrel through the end of 2022, “a price that has signaled robust activity among U.S. operators in the past.” The agency said changes in rig counts typically follow WTI price changes by three to six months, with production changes some two months after rig changes, so “current crude oil price levels will not likely affect production until late 2021.”
U.S. crude production is forecast to average some 11.2 million bpd in the second and third quarters of the year, “before beginning to rise more steadily,” reaching 11.3 million bpd in the fourth quarter and 12.2 million bpd by the fourth quarter of 2022.
EIA did note that operators are adding rigs more slowly than when prices reached similar levels in the past. “If operators take a more cautious approach to rig deployment than we are expecting, crude oil production could be lower than in our forecast,” the agency said.
Gulf of Mexico production is expected to average 1.8 million bpd both this year and next, with 10 new projects likely to begin operations during the period expected to help offset declines at existing projects.
U.S. dry natural gas production is forecast to average 92.6 billion cubic feet per day this year, up 1.3% from 2020, with natural gas production rising in response to higher crude and natural gas prices.
With Henry Hub spot prices forecast to average more than $1 per million Btu higher than in 2020, an increase of 58%, associated dry natural gas production in the Permian from oil directed rigs is expected to increase in 2021 as WTI prices are up almost $27 per barrel, 68%, from 2020.
Dry natural gas production is expected to average 94.7 bcf per day next year, up 2.3% from this year.
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