Oil & Energy

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In November's Short-Term Energy Outlook (STEO) the EIA expects oil prices limited by high global oil inventory levels and surplus crude oil production capacity. EIA expects that as global oil demand rises, forecast inventory draws in 2021 will cause some upward oil price pressures.

EIA STEO Nov 2020 oil consumption 

Highlights:

  • EIA expects high global oil inventory levels and surplus crude oil production capacity will limit upward pressure on oil prices and that Brent prices will remain near $40/b through the end of 2020.
  • EIA expects that as global oil demand rises, forecast inventory draws in 2021 will cause some upward oil price pressures. EIA forecasts Brent crude oil prices will average $47/b in 2021.
  • Liquid fuels consumption was down 5.9 million b/d from October 2019, but it was up from both the third-quarter 2020 average of 94.1 million b/d and the second-quarter 2020 average of 85.3 million b/d.
  • EIA forecasts that global consumption of petroleum and liquid fuels will average 92.9 million b/d for all of 2020, down by 8.6 million b/d from 2019, before increasing by 5.9 million b/d in 2021.
  • U.S. crude oil production to generally decline to an average of 11.0 million b/d in the second quarter of 2021 because new drilling activity will not generate enough production to offset declines from existing wells.
  • EIA expects drilling activity to rise later in 2021, contributing to U.S. crude oil production reaching 11.3 million b/d in the fourth quarter of 2021.
  • On an annual average basis, EIA expects U.S. crude oil production to fall from 12.2 million b/d in 2019 to 11.4 million b/d in 2020 and 11.1 million b/d in 2021.

Crude Oil Prices

Brent crude oil spot prices averaged $40 per barrel (b) in October, down $1/b from the average in September. Brent prices fell in October as previously disrupted crude oil production in Libya came back online and as COVID-19 cases began increasing in many countries, which could reduce oil demand in the coming months. Despite these developments, the U.S.

Energy Information Administration (EIA) expects global oil inventories to continue falling in the coming months. However, EIA expects high global oil inventory levels and surplus crude oil production capacity will limit upward pressure on oil prices and that Brent prices will remain near $40/b through the end of 2020. EIA expects that as global oil demand rises, forecast inventory draws in 2021 will cause some upward oil price pressures. EIA forecasts Brent crude oil prices will average $47/b in 2021.

EIA STEO Nov 2020 WTI

Consumption

EIA estimates that an average of 95.3 million barrels per day (b/d) of petroleum and liquid fuels was consumed globally in October. Liquid fuels consumption was down 5.9 million b/d from October 2019, but it was up from both the third-quarter 2020 average of 94.1 million b/d and the second-quarter 2020 average of 85.3 million b/d. EIA forecasts that global consumption of petroleum and liquid fuels will average 92.9 million b/d for all of 2020, down by 8.6 million b/d from 2019, before increasing by 5.9 million b/d in 2021.

Production

EIA reported that 10.6 million b/d of crude oil was produced in the United States in August (the most recent month for which historical data are available), down 0.4 million b/d from July. Production fell in August mainly because hurricanes disrupted production from the U.S. Gulf of Mexico. EIA reported that U.S. crude oil production in the Gulf of Mexico averaged 1.2 million b/d in August, down 0.5 million b/d from July. Since reaching a two-and-a-half year low of 10.0 million b/d in May, when producers curtailed wells, U.S. crude oil production has increased mainly because tight oil operators have brought wells back online

in response to rising prices. EIA estimates that production will rise to 11.2 million b/d in November. However, EIA expects U.S. crude oil production to generally decline to an average of 11.0 million b/d in the second quarter of 2021 because new drilling activity will not generate enough production to offset declines from existing wells. EIA expects drilling activity to rise later in 2021, contributing to U.S. crude oil production reaching 11.3 million b/d in the fourth quarter of 2021. On an annual average basis, EIA expects U.S. crude oil production to fall from 12.2 million b/d in 2019 to 11.4 million b/d in 2020 and 11.1 million b/d in 2021.

Source EIA STEO

From the TradersCommunity Research Desk

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