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EIA: Brent spot price averaged $65 in March
Up $33 from March 2020, $3 from February, on expectations of rising oil demand as vaccination rate, economic activity increase Kristen Nelson Petroleum News
The Brent crude oil spot price averaged $65 per barrel in March, the U.S. Energy Information Administration said April 6 in its Short-Term Energy Outlook, up $3 per barrel from February, and up $33 from March 2020 at the beginning of the coronavirus pandemic in the U.S.
“As economic activity recovers and petroleum consumption rises globally, EIA expects international benchmark Bent crude oil prices to average $64 per barrel this summer, up from $36 per barrel last summer,” EIA Acting Administrator Steve Nalley said in a statement accompanying release of the April Outlook. “Production restraint on the part of OPEC and its partner countries also contributes to our price expectation,” he said.
EIA said it is forecasting an average $65 per barrel Brent price in the second quarter, $61 per barrel during the second half of the year and $60 per barrel in 2022. The price is expected to average $62 per barrel this year - with both the 2021 and 2022 forecasts up from March, reflecting higher forecast draws from global inventories this year, particularly in the second quarter, reducing global oil inventory levels through the forecast period. EIA said the larger inventory draws are based on lower expected OPEC production in the second quarter.
Consumption, supplies “EIA estimates that worldwide consumption of petroleum and liquid fuels will grow by 6% in 2021 and an additional 4% in 2022,” Nalley said. “We forecast that the world’s oil consumption next year will grow and reach levels from 2019.”
The agency said it estimates that worldwide consumption of petroleum and liquid fuels was 96 million barrels per day in March, up 4.7 million bpd from March 2020. The forecast for 2021 is an average of 97.7 million bpd, up 5.5 million bpd from 2020. Consumption is forecast to increase by 3.7 million bpd in 2022 to average 101.3 million bpd.
US crude production EIA said U.S. domestic crude oil production was 11.1 million bpd in January and is estimated to have declined by 800,000 bpd in February, “mostly because of cold temperatures that affected much of the country, particularly Texas.”
It is forecast to average 10.9 million bpd in the second quarter and increase to almost 11.4 million bpd by the fourth quarter and is expected to average 11.9 million bpd in 2022, based on an expectation, EIA said, that West Texas Intermediate will remain above $55 per barrel through the forecast period.
The agency said its forecasts for U.S. crude production of 11 million bpd this year and 11.9 million bpd in 2022 are lower by 100,000 and 200,000 bpd, respectively, than last month because, in spite of higher forecast oil prices, “we now forecast that rig activity in producing areas outside the Permian - such as Bakken, Eagle Ford, and Anadarko - will be lower than previously expected.”
Domestic natural gas The Henry Hub natural gas spot price averaged $2.62 per million British thermal units in March, down from $5.35 in February, “primarily because the cold weather and related high demand and market disruptions that drove prices to recent heights in February abated in March,” EIA said.
Henry Hub is expected to average $2.73 per million Btu in the second quarter and $3.04 for the entire year, up from the 2020 average of $2.03 per million Btu.
The agency said it expects that continued growth in exports of liquefied natural gas exports, combined with just a slight increase in dry natural gas production, will result in an average price of $3.11 per million Btu next year.
Production of dry natural gas is forecast to average 91.4 billion cubic feet per day this year, about the same as last year’s average, falling to a low of 90.8 bcf per day in May and then rising through most of the rest of the year to reach a high of 92.4 bcf per day in November.
“The increase in production in 2021 reflects higher forecast natural gas prices as well as higher forecast crude oil prices, which we expect will contribute to more associated natural gas production, especially in the Permian region,” EIA said.
Financing issues “Since September 2020, debt and equity issuance has increased in all but one month, suggesting that increasing crude il prices are encouraging U.S. crude oil producers to raise money to refinance debts, resume drilling activities, or purchase acreage,” the agency said.
Debt and equity issuance announcements among publicly traded independent U.S. exploration and production companies totaled $4.4 billion in March, EIA said, which was the highest since last August and higher than the 2016-20 five-year median of $2.4 billion.
Low interest rates have lowered the cost of issuing debt and likely contributed to recent growth in debt and equity issuance, EIA said.
“Although primarily a result of higher crude oil prices, high capital availability for U.S. producers also supports EIA’s forecast for U.S. crude oil production to increase from 10.7 million b/d in first-quarter 2021 to 12.2 million b/d by fourth-quarter 2022,” the agency said.
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