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US crude almost 11 million bpd in April
EIA expects Brent to average $65 per barrel in 2nd quarter, $61 in 2nd half of year and in 2022, with WTI above $55 through 2022 Kristen Nelson Petroleum News
In its May Short-Term Energy Outlook, issued May 11, the U.S. Energy Information Administration said U.S. crude oil production continues to rise.
While the most recent data, for February, shows a drop, to 9.9 million barrels per day, down 1.2 million bpd from January, EIA said it believes that is an anomaly.
The agency is estimating that U.S. crude production rose to 10.9 million bpd in March and to almost 11 million bpd in April.
The February decline was caused by cold temperatures, EIA said, which caused significant declines in Texas production and smaller declines in other states, with production outages estimated to be largely limited to February.
The agency expects the West Texas Intermediate price will stay in a range to encourage drilling.
“We estimate that U.S. benchmark West Texas Intermediate crude oil prices will remain above $55 per barrel through 2022,” EIA Acting Administrator Steve Nalley said in a statement. “This benchmark price will likely encourage producers to drill and complete wells and to offset production declines at existing wells, and that activity along with our forecast for rising production from multiple new projects in the Federal Offshore Gulf of Mexico, leads us to believe U.S. crude oil production will average 11.3 million barrels per day in the fourth quarter of 2021 and 11.8 million barrels per day in 2022.”
EIA said the spread between Brent and WTI has been increasing since November, with weather events in the U.S. appearing to play a role along with rising U.S. crude oil production. From a narrow average spread of $1.68 per barrel in October, the lowest point since the pandemic began, the spread has widened each month, averaging $3.38 per barrel in March and $3.63 per barrel in April.
Brent steady Brent prices averaged $65 per barrel in April, EIA said, unchanged from the March average.
“Brent crude oil prices remained at $65 per barrel in April as COVID-19 continued to affect demand in major economies,” Nalley said. “U.S. oil demand is increasing along with COVID-19 vaccination rates and overall economic activity, but India’s oil demand is declining due to rising COVID-19 cases,” he said.
The agency is forecasting that Brent will average $65 per barrel in the second quarter, $61 per barrel in the second half of the year and $61 per barrel in 2022.
World consumption EIA said it estimates that worldwide 96.2 million bpd of petroleum and liquid fuels were consumed in April, up 15.8 million bpd from April 2020 but down 4 million bpd from 2019 levels.
Nalley said EIA has lowered its estimates for global consumption based on “lower economic growth estimates and decreased demand for transportation fuels in India.” Global consumption for 2021 is now estimated to average 97.7 million bpd, he said, “an increase of 5.4 million barrels per day over 2020.”
EIA said the estimate for global petroleum and liquid fuels consumption is an average of 101.4 million bpd in 2022, an increase of 3.7 million bpd.
Natural gas The Henry Hub spot price for natural gas averaged $2.66 per million British thermal units in April, up slightly from a March average of $2.62 per million Btu, EIA said. The price is expected to average $2.78 per million Btu in the second quarter, and $3.05 for the year, up from the 2020 average of $2.03 per million Btu.
Two factors are expected to drive the rise in natural gas prices, the agency said - growth in liquefied natural gas exports and rising domestic consumption in the residential, commercial and industrial sectors.
The Henry Hub spot price is expected to fall to an average of $3.02 per million Btu in 2022, with LNG exports expected to slow and production expected to rise.
“U.S. liquefied natural gas exports set an all-time record in March 2021,” Nalley said, “averaging 10.5 billion cubic feet per day, followed by an April average of 9.2 billion cubic feet per day, the most liquefied natural gas exported from the United States during April since the United States began exporting liquefied natural gas.”
EIA said that in 2020 and January 2021, “more than half of U.S. LNG exports went to Asia. However, in February and March 2021, more than half of U.S. LNG exports went to Europe as a result of spot natural gas prices in Europe reaching levels similar to spot natural gas prices in Asia.”
The agency said it expects LNG exports to decline in May to 8.6 bcf per day before rising above 9 bcf per day in the summer months to meet peak demand, with exports expected to average 9.2 bcf per day in both 2021 and 2022, up from 6.5 bcf in 2020, with flat exports in 2022 reflecting the agency’s expectation “that limited new expert capacity will come online during the forecast period.”
U.S. consumption of natural gas is expected to average 82.6 bcf per day this year, down 0.7% from 2020, declining in the forecast to 82.5 bcf per day in 2021, with the decline attributed, in part, to electric power generators switching to coal as a result of rising natural gas prices.
Outside the power sector, consumption is expected to rise due to expanding economic activity and colder temperatures in 2021 compared to 2020.
More electricity from renewables “Our forecast increase in electricity generation from renewable sources is especially pronounced in Texas, where we expect renewables to generate about 30% more electricity this summer than last summer,” Nalley said.
EIA said planned additions to U.S. wind and solar generating capacity in 2021 and 2022 will contribute to rising electricity generation from those sources and estimates the U.S. electric power sector added 14.8 gigawatts of new wind capacity in 2020, with an additional 15.9 GW expected to come online in 2021 and an additional 5.2 GW in 2022.
EIA said utility-scale solar will rise an estimated 10.5 GW in 2020 and is forecast to grow by 15.7 GW in 2021 and by 15.9 GW in 2022, with about 5 GW of small-scale solar, systems less than 1 megawatt, expected to come online in 2021 and again in 2022.
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