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EIA expects Brent to average $61 in 2020
US crude production forecast to average 13.2 million bpd next year, up 900,000 bpd from 2019, but with slower growth rate expected Kristen Nelson Petroleum News
The U.S. Energy Information Administration said Dec. 10 in its Short-Term Energy Outlook that Brent crude oil spot prices averaged $63 per barrel in November, up $3 from October, with the agency’s forecast for Brent in 2020 at $61 per barrel, down from a 2019 average of $64. West Texas Intermediate is projected to average $5.50 per barrel less than Brent next year. EIA said it expects crude oil prices to be lower in 2020 than this year “because of forecast rising global oil inventories, particularly in the first half of the year.”
U.S. crude oil production continued to increase and is expected to average 13.2 million barrels per day in 2020, up 900,000 bpd from this year, EIA said. The agency said U.S. production growth is expected to slow based on a decline in drilling rigs active over the last year, a decline EIA said it expects to see continue into 2020. “Despite the decline in rigs, EIA forecasts production will continue to grow as rig efficiency and well-level productivity rises, offsetting the decline in the number of rigs.”
“While EIA expects the rate of U.S. crude oil production growth to slow in 2020, production is still on pace to set new records in 2019 and 2020,” EIA Administrator Dr. Linda Capuano said in a statement.
US exports “September marked the first month in U.S. recorded data that the United States exported more crude oil and petroleum products than it imported,” Capuano said.
She said records of U.S. imports and exports of crude oil and petroleum products began to be kept on an annual basis in 1949 and on a monthly basis in 1973. “EIA’s December STEO forecasts that U.S. exports of crude oil and petroleum will continue to increase, averaging 570,000 barrels per day in 2020. If realized, 2020 would be the first year the United States becomes a net petroleum exporter on an annual basis,” Capuano said.
EIA said the expected 570,000 bpd average for total crude oil and petroleum net exports in 2020 compares with average net imports of 490,000 bpd this year.
OPEC and prices The Organization of the Petroleum Exporting Countries and a group of other producers announced Dec. 6 that they were deepening production cuts they agreed to in December 2018. Production is now targeted at 1.7 million bpd lower than in October 2018; the former target reduction was 1.2 million bpd, with the cuts in effect through the end of March. EIA said that its assumption is that OPEC will limit production through the end of 2020, based on a forecast of rising inventories, and expects that OPEC crude oil production will average 29.3 million bpd in 2020, down 500,000 bpd from 2019.
EIA said the it expects increased non-OPEC production will more than offset OPEC production cuts, with global liquid fuels supply expected to rise by 1.5 million bpd in 2020, with an increase in global fuels demand of 1.4 million bpd.
“Despite the extension, EIA continues to expect Brent prices to decline from current levels to an average of $59 per barrel in the first half of 2020, based on a forecast of rising global inventories,” Capuano said. “Some upward price pressures could emerge in the second half of the year as global oil demand growth is expected to recover on the back of a modest acceleration in global economic growth,” she said.
Natural gas Capuano said November temperatures in the U.S were colder than the previous 10-year average. “As a result, average Henry Hub spot prices increased to $2.64 per million British thermal units, up 31 cents from October. EIA expects U.S. benchmark Henry Hub spot prices to average $2.45 per million British thermal units in 2020, down 14 cents from the 2019 average, as U.S. production continues at a record level,” she said.
U.S. annual dry natural gas production is forecast to average 92.1 billion cubic feet per day this year, up 10% from 2018, EIA said.
“EIA expects production growth to slow in 2020 because of the lag between changes in price and changes in future drilling activity. The 2020 natural gas production forecast will average 95.1 billion cubic feet per day,” Capuano said.
EIA said low prices in the third quarter of this year “will reduce natural gas-directed drilling activity in the first half of 2020.”
The agency said it expects natural gas production to remain at or lower than the November 2019 level through the end of 2020.
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