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EIA: Brent averaged $43 a barrel in July
Agency expects to see $50 average Brent in 2021; US crude estimated at 11.3 million bpd this year, down from 12.2 million in 2019 Kristen Nelson Petroleum News
Brent spot prices averaged $43 per barrel in July, up $3 from June and up $25 from April, the U.S. Energy Information Administration said Aug. 11 in its Short-Term Energy Outlook.
“EIA expects Brent crude prices to average $43 per barrel during the second half of 2020 and rise to an average of $50 per barrel in 2021,” EIA Administrator Dr. Linda Capuano said in a statement issued in conjunction with the outlook.
EIA said its August outlook is subject to heightened uncertainty because of COVID-19 mitigation and reopening efforts, something the agency has noted in recent outlooks.
As to where crude prices are headed, the agency said high inventory levels and surplus production capacity are expected to limit upward price movement in the coming months, with upward price pressures increasing as inventories decline into next year.
EIA said its outlook is based on U.S. macroeconomic forecasts by IHS Markit, with the July IHS Markit forecast assuming “a smaller decline in U.S. gross domestic product (GDP) in 2020 of 6.1% compared with an assumed decline of 8.2%” in EIA’s July outlook. The agency said it is also assuming a “smaller increase in GDP in 2021 of 3.7% compared with 5.1% growth assumed” in the July outlook.
The IHS Markit forecast used in August also includes average non-form employment of 143 million this year and 149.4 million in 2021, “up by 2.6 million jobs and 2.0 million jobs, respectively, from the previous forecast.”
US crude production EIA said it has lowered its estimates of average U.S. crude production for 2020 by 370,000 bpd from its July outlook, and now expects U.S. crude production to average 11.3 million bpd this year, dropping to 11.1 million bpd in 2021, both down from 12.2 million bpd in 2019.
“May’s average U.S. crude oil production was 1.1 million barrels per day lower than we assessed in July, indicating more extensive production curtailments than previously estimated,” Capuano said.
The August outlook assumes the Dakota Access Pipeline will remain operational while further litigation proceeds.
Globally, EIA estimates that liquid fuels production averaged 91.8 million bpd in the second quarter, down 8.6 million bpd year over year. The agency said the decline reflects voluntary production cuts by the Organization of the Petroleum Exporting Countries and partner countries, “and reductions in drilling activity and production curtailments in the United States because of low oil prices.”
Global liquid fuels inventories are now expected to “decline at a rate of 4.2 million barrels per day in the second half of 2020 after rising at a rate of 6.4 million barrels per day in the first half of the year,” Capuano said.
US natural gas The Henry Hub natural gas spot price averaged $1.77 per million British thermal units in July and EIA said it expects the price to rise through the end of 2021, with sharpest increases this fall and winter with the price expected to average $2.11 per million Btu in September, rising to $3.14 in February, due to rising winter heating demand and reduced production.
“EIA estimates natural gas consumption by the electric power sector for July was the highest monthly average on record. However, we still expect consumption to decline 3% from 2019 to 2020, primarily as a result of a forecast 4.4% decline in consumption in the industrial sector,” Capuano said.
Henry Hub natural gas spot prices are projected to average $2.03 per million Btu this year and $3.14 in 2021.
U.S. dry natural gas production averaged 92.2 billion cubic feet per day in 2019, an annual record, EIA said, and production is forecast to average 88.7 bcf per day this year, falling from a monthly average peak of 96.2 bcf per day in November 2019 to 82.7 bcf per day in April 2021, before increasing slightly.
The largest decline is expected in the Permian, EIA said, with low crude oil prices reducing associated natural gas output from oil-directed rigs.
U.S. dry natural gas production is forecast to average 84 bcf per day in 2021, with production rising beginning in the second quarter “in response to higher natural gas and crude oil prices.”
LNG U.S. liquefied natural gas exports are projected to average 5.5 bcf per day this year and 7.3 bcf per day next year, with LNG exports declining through the end of the summer due to reduced global demand for natural gas, EIA said.
In July, U.S. LNG exports averaged 3.1 bcf, about the same as May 2018, when available liquefaction capacity was about a third of current capacity, the agency said.
Natural gas and LNG prices have reached “all-time historic lows” because of COVID-19 related demand reduction, high storage inventories in Europe and Asia and on-going expansion in liquefaction capacity.
“Low international prices have affected the economic competitiveness of U.S. LNG exports and have led to numerous cargo cancellations, particularly at the Sabine Pass, Corpus Christi, and Freeport LNG export terminals,” EIA said. It expects LNG exports from the U.S. to remain low for the next few months, and cited trade press reports for estimates that some 45 cargoes have been cancelled for August and about 30 for September.
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