The U.S. Energy Information Administration is forecasting that the price of crude oil will remain above $100 this year and that U.S. crude oil production will average 11.9 million barrels per day in 2022 and more than 12.8 million bpd in 2023, surpassing the average annual record of 12.3 million bpd from 2019.
The agency continues to stress the uncertainty in its forecasts, something it emphasized in releasing its May Short-Term Energy Outlook on May 10.
“A high level of uncertainty remains in our outlooks,” said EIA Administrator Joe DeCarolis, “but we have consistently forecast that elevated crude oil prices would help drive record-level annual U.S. oil production levels in 2023. Low global oil inventories coupled with continued high demand for gasoline, diesel, and other petroleum products means that increased production likely won’t have much impact on prices in the short term.”
Other highlights of the May forecast include an increase in the amount of U.S. electricity generation coming from solar and wind power this summer, 11.1% compared to 9.6% last summer.
“High natural gas prices, limited coal supply, the increased solar and wind capacity mean that renewables should play a larger role in the U.S. electricity mix this summer and throughout the year,” DeCarolis said.
The price of Henry Hub natural gas is also of note - forecast to average $8.59 per million British thermal units in the second half of the year, up 88% from the second half of 2021. EIA said this is a significant revision from previous forecasts, largely because it has “updated its power generation modeling to better account for evolving constraints in the coal market.”
EIA’s forecast for coal production is a 3% increase for 2022 from 2021, compared to a 7% increase in the April forecast, and part of the reason the agency is forecasting higher natural gas prices.
“Currently low coal supplies and limited capacity to increase domestic coal production mean that natural gas will remain in high demand for electricity generation, contributing to the higher natural gas prices in our forecast,” DeCarolis said.
Brent crudeEIA said Brent crude averaged $105 per barrel in April, down $13 per barrel from March, but still above $100 per barrel following Russia’s full-scale invasion of Ukraine.
Sanctions on Russia and independent corporate actions contributed to falling oil production in Russia “and continue to create significant market uncertainties about the potential for further oil supply disruptions,” events occurring against what EIA said is a backdrop of low oil inventories and upward price pressures.
The agency expects Brent to average $107 per barrel in the second quarter of this year and $103 in the second half of the year, falling to an average of $97 per barrel in 2023.
U.S. crude production is forecast to average 11.9 million bpd this year, up 0.7 million bpd from 2021, and forecast to average more than 12.8 million bpd in 2023, surpassing the previous 12.3 million bpd record set in 2019.
Natural gasThe Henry Hub natural gas spot price averaged $6.59 per million Btu in April, up from a March average of $4.90 and well above the April 2021 average of $2.66 per million Btu.
EIA said it expects Henry Hub to average $7.83 per million Btu in the second quarter and to average $8.59 in the second half of the year, reflecting an expectation that natural gas storage levels will remain lower than the five-year average this summer.
“Lower-than-average storage levels partly result from limited opportunities for natural gas-to-coal switching for power generation, which we forecast will keep the demand for natural gas for power generation high despite high prices,” the agency said.
If summer temperatures are hotter than expected and electricity demand is greater, the price of natural gas could rise significantly above forecast levels.
EIA also expects U.S. liquefied natural gas exports will remain high during the summer.
It forecasts a drop in Henry Hub to $4.74 per million Btu in 2023, reflecting the agency’s “expectation that the rate of natural gas production will increase next year while LNG export and demand growth slow, contributing to higher storage levels in 2023 than in 2022.”
LNGU.S. LNG exports averaged 11.6 billion cubic feet per day in April, slightly below the peak of almost 12 bcf per day set in March, and exports are forecast to average 12.1 bcf per day from May through August. EIA said this is slightly lower than its previous forecast and “reflects our assumption of slightly lower LNG demand in Asia and Europe this summer compared with our previous assumption, in part because of sustained high natural gas prices.”
U.S. LNG exports are forecast to average 12 bcf per day this year, up 23% from 2021.
EIA said LNG export growth in recent years has been driven by capacity expansions, but the agency said it does not expect any new export facilities to come online in the forecast period and expects LNG export growth to slow to 5% in 2023, with exports averaging 12.6 bcf per day for the year.