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Monday, March 17, 2025

‘Expect lower oil prices next year’ predicts US EIA

by

Geisha Kowlessar-Alonzo
1277 days ago
20210915

As Fi­nance Min­is­ter Colm Im­bert pre­pares his 2021 bud­get, the ad­vice from the Unit­ed States En­er­gy In­for­ma­tion Agency (USEIA) is that crude oil prices will de­cline next year to av­er­age US $66 a bar­rel.

In its Sep­tem­ber Short-Term En­er­gy Out­look the US EIA pre­dicts that slow­ing de­mand growth and high­er pro­duc­tion will lead to a soft­en­ing of prices to­wards the end of cal­en­der 2021 and in­to 2022.

It said, “In 2022, we ex­pect that growth in pro­duc­tion from OPEC+, US tight oil, and oth­er non-OPEC coun­tries will out­pace slow­ing growth in glob­al oil con­sump­tion and con­tribute to Brent prices de­clin­ing to an an­nu­al av­er­age of $66/b (bar­rel).”

Im­bert has in the past said he re­lies on the US EIA en­er­gy out­look to help him in his fore­cast for en­er­gy prices. The en­er­gy fore­cast is im­por­tant in cal­cu­lat­ing gov­ern­ment rev­enue, for­eign ex­change earn­ings and can have a ma­jor im­pact on the per­for­mance of the off­shore and on­shore economies.

Last Oc­to­ber, Im­bert pre­sent­ed a $49.57 bil­lion bud­get, based on an oil price of US$45 per bar­rel, and $3 mmb­tu for nat­ur­al gas.

Ac­cord­ing to the EIA’s Short Term En­er­gy Out­look (STEO) Brent crude oil spot prices av­er­aged $71 per bar­rel (b) in Au­gust, down $4/b from Ju­ly but up $26/b from Au­gust 2020.

It said Brent prices have risen over the past year as re­sult of steady draws on glob­al oil in­ven­to­ries, which av­er­aged 1.8 mil­lion bar­rels per day (b/d) dur­ing the first half of 2021 (1H21).

“We ex­pect Brent prices will re­main near cur­rent lev­els for the re­main­der of 2021, av­er­ag­ing $71/b dur­ing the fourth quar­ter of 2021 (4Q21).” The re­port read.

For Im­bert the headache is not just go­ing to be oil and nat­ur­al gas process but as im­por­tant will be the pro­duc­tion.

Low­er nat­ur­al gas pro­duc­tion has hurt the coun­try in both LNG ex­ports and avail­abil­i­ty for the petro­chem­i­cal sec­tor.

The US EIA sad its STEO re­mains sub­ject to height­ened lev­els of un­cer­tain­ty re­lat­ed to the on­go­ing re­cov­ery from the COVID-19 pan­dem­ic.

“US eco­nom­ic ac­tiv­i­ty con­tin­ues to rise af­ter reach­ing mul­ti­year lows in the sec­ond quar­ter of 2020 (2Q20). US gross do­mes­tic prod­uct (GDP) de­clined by 3.4% in 2020 from 2019 lev­els. This STEO as­sumes US GDP will grow by 6.0% in 2021 and by 4.4% in 2022. The US macro­eco­nom­ic as­sump­tions in this out­look are based on fore­casts by IHS Mark­it. Our fore­cast as­sumes con­tin­u­ing eco­nom­ic growth and in­creas­ing mo­bil­i­ty. Any de­vel­op­ments that would cause de­vi­a­tions from these as­sump­tions would like­ly cause en­er­gy con­sump­tion and prices to de­vi­ate from our fore­cast.” the EIA re­port­ed.

Ac­cord­ing to the EIA, more than 90 per cent of crude oil pro­duc­tion in the Fed­er­al Off­shore Gulf of Mex­i­co (GOM) was of­fline in late Au­gust fol­low­ing Hur­ri­cane Ida.

As a re­sult of the out­age, GOM pro­duc­tion av­er­aged 1.5 mil­lion b/d in Au­gust, down 0.3 mil­lion b/d from Ju­ly.

How­ev­er, it is ex­pect­ed that crude oil pro­duc­tion in the GOM will grad­u­al­ly come back on­line dur­ing Sep­tem­ber and av­er­age 1.2 mil­lion b/d for the month be­fore re­turn­ing to an av­er­age of 1.7 mil­lion b/d in 4Q21.

To­tal US crude oil pro­duc­tion av­er­aged 11.3 mil­lion b/d in June—the most re­cent month­ly his­tor­i­cal da­ta point.

And the EIA fore­cast it will re­main near that lev­el through the end of 2021 be­fore in­creas­ing to an av­er­age of 11.7 mil­lion b/d in 2022, dri­ven by growth in on­shore tight oil pro­duc­tion.

It al­so ex­pects that growth will re­sult from op­er­a­tors be­gin­ning to in­crease rig ad­di­tions, off­set­ting pro­duc­tion de­cline rates.

“We es­ti­mate that 98.4 mil­lion b/d of pe­tro­le­um and liq­uid fu­els was con­sumed glob­al­ly in Au­gust, an in­crease of 5.7 mil­lion b/d from Au­gust 2020 but still 4.0 mil­lion b/d less than in Au­gust 2019,” the EIA said.

It al­so fore­casts that glob­al con­sump­tion of pe­tro­le­um and liq­uid fu­els will av­er­age 97.4 mil­lion b/d for all of 2021, which is a 5.0 mil­lion b/d in­crease from 2020, and by an ad­di­tion­al 3.6 mil­lion b/d in 2022 to av­er­age 101.0 mil­lion b/d, al­most even with 2019 lev­els.

US reg­u­lar gaso­line re­tail prices av­er­aged $3.16 per gal­lon (gal) in Au­gust, the high­est month­ly av­er­age price since Oc­to­ber 2014.

Re­cent gaso­line price in­creas­es re­flect ris­ing whole­sale gaso­line mar­gins amid rel­a­tive­ly low gaso­line in­ven­to­ries.

In ad­di­tion, re­cent im­pacts from Hur­ri­cane Ida on sev­er­al US Gulf Coast re­finer­ies are adding up­ward price pres­sures in the near term.

Re­gard­ing nat­ur­al gas, the EIA said in Au­gust, the nat­ur­al gas spot price at Hen­ry Hub av­er­aged $4.07 per mil­lion British ther­mal units (MMB­tu), which is up from the Ju­ly av­er­age of $3.84/MMB­tu.

This in­crease, it ex­plained, re­flects hot­ter tem­per­a­tures in Au­gust on av­er­age across the US com­pared with Ju­ly, which caused de­mand for nat­ur­al gas in the elec­tric pow­er sec­tor to be high­er than ex­pect­ed.

Prices rose fur­ther in late Au­gust when Hur­ri­cane Ida caused a de­cline in nat­ur­al gas pro­duc­tion in the GOM.

“We ex­pect the Hen­ry Hub spot price will av­er­age $4.00/MMB­tu in 4Q21, as the fac­tors that drove prices high­er dur­ing Au­gust lessen,” the EIA said, adding that fore­cast Hen­ry Hub prices this win­ter reach a month­ly av­er­age peak of $4.25/MMB­tu in Jan­u­ary and gen­er­al­ly de­cline through 2022, av­er­ag­ing $3.47/MMB­tu for the year amid ris­ing US nat­ur­al gas pro­duc­tion and slow­ing growth in LNG ex­ports.

More than 90 per cent of nat­ur­al gas pro­duc­tion in the GOM was of­fline in late Au­gust fol­low­ing Hur­ri­cane Ida.

The EIA not­ed that GOM pro­duc­tion of mar­ket­ed nat­ur­al gas av­er­aged 1.9 bil­lion cu­bic feet per day (Bcf/d) in Au­gust, down 0.4 Bcf/d from Ju­ly.

It said it ex­pects that nat­ur­al gas pro­duc­tion in the GOM will grad­u­al­ly come back on­line dur­ing the first half of Sep­tem­ber and av­er­age 1.5 Bcf/d for the month be­fore re­turn­ing to an av­er­age of 2.1 Bcf/d in 4Q21.

Elec­tric­i­ty, coal, re­new­ables, emis­sions

The share of elec­tric­i­ty gen­er­a­tion pro­duced by nat­ur­al gas in the US will av­er­age 35 per cent in 2021 and 34 per cent in 2022, down from 39 per cent in 2020, ac­cord­ing to the EIA..

It added that in 2021, the fore­cast share for nat­ur­al gas as a gen­er­a­tion fu­el de­clined in re­sponse to its ex­pec­ta­tion of a high­er de­liv­ered nat­ur­al gas price for elec­tric­i­ty gen­er­a­tors, which the EIA fore­casts will av­er­age $4.69/MMB­tu in 2021 com­pared with $2.39/MMB­tu in 2020.

“The share of nat­ur­al gas as a gen­er­a­tion fu­el al­so de­clines through 2022 be­cause of ex­pect­ed in­creas­es in gen­er­a­tion from re­new­able sources,” the EIA added.

As a re­sult of the high­er ex­pect­ed nat­ur­al gas prices, the fore­cast share of elec­tric­i­ty gen­er­a­tion from coal rose from 20 per cent in 2020 to about 24 per cent in both 2021 and 2022.

New ad­di­tions of so­lar and wind gen­er­at­ing ca­pac­i­ty, the EIA added, are off­set some­what by re­duced gen­er­a­tion from hy­dropow­er this year, re­sult­ing in the fore­cast share of all re­new­ables in US elec­tric­i­ty gen­er­a­tion to av­er­age 20 per cent in 2021, about the same as last year, be­fore ris­ing to 22 per cent in 2022. The EIA al­so not­ed that the nu­clear share of US elec­tric­i­ty gen­er­a­tion de­clined from 21 per cent in 2020 to 20 per cent in 2021 and to 19 per cent in 2022 as a re­sult of re­tir­ing ca­pac­i­ty at some nu­clear pow­er plants.

It fore­casts that planned ad­di­tions to US wind and so­lar gen­er­at­ing ca­pac­i­ty in 2021 and 2022 will in­crease elec­tric­i­ty gen­er­a­tion from those sources.

The EIA al­so es­ti­mates that US en­er­gy-re­lat­ed car­bon diox­ide (CO2) emis­sions will de­crease by 11 per cent in 2020 as a re­sult of less en­er­gy con­sump­tion re­lat­ed to re­duced eco­nom­ic ac­tiv­i­ty and re­spons­es to COVID-19.

For 2021, it fore­casts that en­er­gy-re­lat­ed CO2 emis­sions will in­crease about eight per cent from the 2020 lev­el as eco­nom­ic ac­tiv­i­ty in­creas­es and leads to ris­ing en­er­gy use.

It al­so ex­pect en­er­gy-re­lat­ed CO2 emis­sions to rise in 2022 but at a slow­er rate of two per cent.

Fur­ther, the EIA fore­cast that af­ter de­clin­ing by 19 per cent in 2020, coal-re­lat­ed CO2 emis­sions will rise by 22 per cent in 2021 and then de­crease by two per cent in 2022, adding that short-term changes in en­er­gy-re­lat­ed CO2 can be af­fect­ed by tem­per­a­ture.


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