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EIA sees Brent averaging $49 next year
Agency estimates US crude production averaged 11.2 million bpd in November; average expected to fall below 11 million bpd by March Kristen Nelson Petroleum News
Brent crude oil spot prices averaged $43 per barrel in November, up $3 per barrel from October, the U.S. Energy Information Administration said Dec. 8 in its December Short-Term Energy Outlook.
The increase followed “news that multiple COVID-19 vaccines appeared to be effective and that OPEC and its partners would limit production increases planned for January 2021,” EIA Administrator Dr. Linda Capuano said in remarks accompanying the outlook.
EIA said it expects Brent to average $43 per barrel in the fourth quarter, increasing to an average of $49 per barrel next year, with the higher forecast reflecting the agency’s “expectation that while inventories will remain high, they will decline with rising global oil demand and restrained OPEC+ oil production.” Brent is expected to average $47 in the first quarter, up $5 per barrel from the agency’s November forecast, rising to average $50 in the fourth quarter, up $1 per barrel from last month’s outlook.
EIA said higher first quarter price expectations reflect steeper expected inventory draws following the Dec. 3 OPEC+ decision to limit previously planned January production increases. The agency said it expects high global inventory levels and surplus crude production capacity to “limit upward pressure on oil prices through much of 2021.”
EIA prefaced its forecast with a warning, regularly included in the months of the pandemic, that the outlook is subject to “heightened levels of uncertainty” because of COVID-19, related reduced economic activity and resulting changes in energy demand and supply patterns.
U.S. gross domestic product declined 4.4% in the first half of the year compared to the same period in 2019. GDP began rising in the third quarter, the agency said, and its expectation is that GDP will grow by 3.1% in 2021 compared to this year.
OPEC production “Following OPEC and its partners’ decision to limit oil production increases planned for January, EIA lowered its forecast for OPEC crude oil production to an average 25.7 million barrels per day in the first quarter of 2021, which is 1.7 million barrels per day lower than our November forecast,” Capuano said.
EIA said OPEC production this year is estimated to average 25.6 million bpd. Annualized 2021 production is expected to average 27.5 million bpd, with the increase reflecting potential OPEC production increases and increases in Libyan production.
OPEC had planned to increase production by 2 million bpd in January, but instead set the target increase at 500,000 bpd and said it would access markets and demand monthly.
US crude production “EIA estimates crude oil production totaled 11.2 million barrels per day in the United States in November,” Capuano said. “We expect U.S. oil production will decrease to 11.0 million barrels per day in February 2021 as decline rates at existing wells outpace production from newly drilled wells in the Lower 48 states over the coming months.”
The agency said it expects Lower 48 crude production to increase from 8.7 million bpd in February to 9.1 million bpd next December, “as drilling increases in response to rising oil prices,” with the increase contributing to total U.S. crude oil production averaging 11.4 million bpd in December 2021.
EIA said that on an annual average basis it expects U.S. crude oil production to fall from 12.2 million bpd in 2019 to 11.3 million bpd this year and 11.1 million bpd in 2021.
US natural gas “Despite falling U.S. natural gas production during much of 2020 and growing LNG exports in recent months, reduced U.S. consumption resulting from warmer November temperatures contributed to natural gas inventories ending the month 8% higher than the previous five-year average. However, we expect that declines in natural gas production will outpace declines in consumption for the remainder of the winter as well as contribute to more natural gas withdrawals compared with the previous five-year average,” Capuano said.
EIA is forecasting U.S. dry natural gas production to average 90.9 billion cubic feet per day in 2020, down from a 2019 average of 93.1 bcf, with monthly average production falling from a record 97 bcf per day in December 2019 to 87.1 bcf in April 2021, “before increasing slightly.”
Dry natural gas production is forecast to average 87.9 bcf per day in the U.S. in 2021, with production expected “to begin rising in the second quarter of 2021 in response to higher natural gas and crude oil prices.”
The agency estimated that the U.S. exported 9.4 bcf per day of liquefied natural gas in November, “the most for any month on record.” EIA said it expects LNG demand to continue increasing, driven primarily by forecasts of colder-than-normal winter weather in northern Asia and Europe and South Korean coal plant closures.
U.S. LNG exports are forecast to exceed 9.5 bcf per day in December through February, and average 8.5 bcf per day in 2021, “a 30% increase from 2020,” EIA said.
Capuano said that in the December outlook “EIA decreased the forecast for Henry Hub spot prices in 2021, reflecting our expectation of larger natural gas inventories than previously forecast. We expect prices of natural gas at Henry Hub to average $3.01 per million British thermal units in 2021.”
Henry Hub averaged $2.61 per million Btu in November, EIA said, up from an October average of $2.39. The price is expected to reach a monthly average of $3.10 per million Btu in January.
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