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EIA forecasts $61 Brent in ’21, $59 in ’22
US crude expected to average 11.1 million bpd this year, rising to 12 million bpd in 2022, reflecting higher expected crude prices Kristen Nelson Petroleum News
U.S. crude oil production is expected to average 11.1 million barrels per day this year, rising to 12 million bpd in 2022, the U.S. Energy Information Administration said March 9 in its Short-Term Energy Outlook.
The agency estimates that U.S. crude production averaged 10.4 million bpd in February, down 0.5 million from its estimate for January production, with most of that decline reflecting February’s cold temperatures, particularly in Texas.
“Unlike the relatively winterized oil production infrastructure in northern areas of the country, infrastructure in Texas, such as wellheads, gathering lines, and processing facilities, are more susceptible to the effects of extremely cold weather,” the agency said.
EIA is forecasting U.S. crude production will rise to almost 11 million bpd in March.
The 2020 average was 11.3 million bpd, down from a 2019 average of 12.2 million bpd, with the 2021 forecast in March up 0.5 million bpd from the February forecast.
“EIA increased our forecast for U.S. crude oil production in 2022 in response to the expected increase in prices,” EIA Acting Administrator Steve Nalley said in a statement accompanying the STEO release. “We now expect U.S. production to reach 12.0 million barrels per day in 2022.”
Brent spot prices EIA said COVID-19 and related reduced economic activity “caused changes in energy demand and supply during the past year and will continue to affect these patterns in the future.”
Brent crude oil spot prices averaged $62 per barrel in February, up $8 from the January average and up $7 per barrel from February 2020, the agency said, with the rising prices in February reflecting expectations of rising oil demand as COVID-19 vaccinations and global economic activity increase, combined with ongoing supply limitations by the Organization of the Petroleum Exporting Countries and partners, and disruptions in supply from extreme weather in the U.S.
“EIA expects March and April Brent crude oil prices to average $67 per barrel - which is $7 and $12 higher, respectively, than forecast last month - because of continuing production restraint from OPEC and its partner countries,” Nalley said.
The agency said IHS Markit is forecasting increased economic activity. The U.S. gross domestic product is projected to grow by 5.5% this year, up from the 3.8% growth assumed in the February STEO, and by 4.2% next year, which remains “largely unchanged” from its February forecast, EIA said.
Global GDP, estimated by Oxford Economics, is also expected to be stronger than in the February STEO, contributing to 0.3 million bpd more growth in global liquid fuels consumption in 2022 than in the February STEO.
EIA said it is forecasting similar overall consumption in 2021 “compared with the February STEO because the effects of stronger economic activity are offset by a reduced expectation for global jet fuel consumption.” The agency said it reduced expectations for jet fuel consumption this year “in response to lower than expected first-quarter flight activity, along with reduced air travel expectations from the International Civil Aviation Organization during the second quarter of 2021.”
Natural gas “Henry Hub natural gas spot prices increased to $5.35 per million British thermal units in February, the highest monthly average since February 2014,” Nalley said.
This was up from a January average of $2.71 per million Btu, the agency said, with the higher February prices attributed to much colder-than-normal temperatures in most of the country.
“Price effects were amplified because the rise in demand occurred amid a drop in natural gas production due to well freeze-offs,” EIA said.
The Henry Hub spot price is expected to decline to an average of $2.88 per million Btu in the second quarter, and to average $3.14 per million Btu this year, up from the 2020 average of $2.03 per million Btu. The continued growth in liquefied natural gas exports, combined with relatively flat production, are expected to contribute to a rise in Henry Hub spot prices to an average of $3.16 per million Btu in 2022.
U.S. natural gas consumption is expected to average 82.5 billion cubic feet per day this year, down 0.9% from 2020, reflecting less natural gas consumed for electric power because of higher prices compared to 2020.
EIA said it estimates that natural gas consumption in February, 111.8 bcf per day, was the highest on record because of cold weather and increased natural gas demand for heating and power generation.
The agency said its forecast is that U.S. production of dry natural gas averaged 87.8 bcf per day in February, down from 92.4 bcf per day in December - the most recent month for which there is final data, with the decline “mostly a result of freeze-offs, which occur when water and other liquids in the raw natural gas stream freeze at the wellhead or in natural gas gathering lines near production activities.”
The U.S. exported an average of 7.5 bcf per day of LNG in February, down 23%, 2.3 bcf per day, from January, with exports “affected by the logistical constraints associated with suspending piloting services on several days at some U.S. LNG export ports located in the Gulf of Mexico because of inclement weather,” and several U.S. LNG export facilities experiencing lower natural gas feedstock supply in mid-February “following declines in natural gas production because of extremely cold weather.”
The agency said it expects LNG exports to continue a seasonal decline from March through May, with the average for that period of 7.8 bcf per day.
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