In the August STEO, EIA estimate for U.S. crude oil production will average 11.9 million barrels per day (b/d) in 2022 and 12.7 million b/d in 2023, which would set a record for most U.S. crude oil production in a year. The current record is 12.3 million b/d, set in 2019.
STEO Highlights
- Estimate EIA STEO Current Yr Crude Forecast (Bpd) Aug: 11.86M (prev 11.91M)
- Forward Yr Crude Forecast (Bpd): 12.70M (prev 12.77M)
- Current Yr Dry NatGas Forecast (Bcf/d): 96.59 (prev 96.23)
- Forward Yr Dry NatGas Forecast (Bcf/d): 100.02 (prev 99.98)
The August Short-Term Energy Outlook (STEO) is subject to heightened uncertainty resulting from Russia’s full-scale invasion of Ukraine, how sanctions affect Russia’s oil production, the production decisions of OPEC+, the rate at which U.S. oil and natural gas production rises, and other contributing factors. Less robust economic activity in our forecast could result in lower-than-forecast energy consumption.
- EIA forecast the spot price of Brent crude oil will average $105 per barrel (b) in 2022 and $95/b in 2023.
- U.S. crude oil production in our forecast averages 11.9 million barrels per day (b/d) in 2022 and 12.7 million b/d in 2023, which would set a record for most U.S. crude oil production in a year. The current record is 12.3 million b/d, set in 2019.
- EIA estimate that 98.8 million b/d of petroleum and liquid fuels was consumed globally in July 2022, an increase of 0.9 million b/d from July 2021. EIA forecast that global consumption of petroleum and liquid fuels will average 99.4 million b/d for all of 2022, which is a 2.1 million b/d increase from 2021. EIA forecast that global consumption of petroleum and liquid fuels will increase by another 2.1 million b/d in 2023 to average 101.5 million b/d.
- The U.S. retail price for regular grade gasoline averaged $4.56 per gallon (gal) in July, and the average retail diesel price was $5.49/gal. EIA expect retail gasoline prices to average $4.29/gal in the third quarter of 2022 (3Q22) and fall to an average of $3.78/gal in 4Q22. Retail diesel prices in our forecast average $5.02/gal in 3Q22 and $4.39/gal in 4Q22.
- U.S. refineries average 93% utilization in 3Q22 in EIA’s forecast, as a result of high wholesale product margins. Elevated prices for gasoline and diesel reflect refining margins for those products that are at or near record highs amid low inventory levels.
Global Oil Production
Russia
Russia’s full-scale invasion of Ukraine has resulted in shifting trade patterns, leaving Europe to find substitutes for Russia’s oil. This change has driven up the price of Brent contracts to a level high enough to reduce Asia’s imports of Brent crude oil and to retain more oil in Europe. The Brent-WTI spread has also increased enough to attract more imports of crude oil from the United States into Europe.
From March through July, the Brent-WTI spread averaged $6.05/b, an almost $2.50/b increase from the first two months of the year. We forecast the Brent-WTI spread will average $6/b in 2023, up $2/b from the July STEO. This high spread will keep exports from Europe to Asia subdued and encourage higher imports from the United States, both of which will likely be necessary as the EU reduces crude oil imports from Russia by 90% by the end of the year.
Forecast depends heavily on future production decisions by OPEC+, the responsiveness of U.S. tight oil production to oil prices, and the pace of oil demand growth, among other factors.
Top 5 Crude Oil Producing Countries Prior To Russian Invasion of Ukraine
Source: EIA
From The TradersCommunity Desk