Global crude oil consumption increased in October as spot prices for international benchmark Brent crude oil fell from $ 1 to $ 40 per barrel, starting in September, according to the US Energy Information Administration (EIA).
The EIA released the Short-Term Energy Outlook on Tuesday (November 10th) showing that GDP started growing in the third quarter and is expected to grow 3.7% from 2020 to 2021. US macroeconomic assumptions in the outlook are based on IHS Markit forecasts.
“Brent crude oil prices in October fell by a dollar compared to September as production in Libya came back on line and COVID-19 cases around the world rose,” said Linda Capuano, administrator of the EIA. “The EIA expects Brent prices to stay close to the October average of $ 40 per barrel for the remainder of the year as high global oil inventories and excess production capacity limit the upward pressure on prices.
By 2021, Brent crude oil prices are expected to hit $ 47 a barrel, Capuano said.
“Although global oil consumption increased in October compared to the second and third quarters of 2020, it decreased by 5.9 million barrels per day compared to October 2019,” she noted. “The EIA predicts that global consumption of oil and liquid fuels will be 8.6 million barrels per day less in 2020 than in 2019.”
US crude oil production fell from 400,000 barrels per day to 10.6 million barrels per day in August, starting in July, according to the most recent data available. The drop can be attributed to hurricanes disrupting production in the Gulf of Mexico in the United States. Production is expected to reach 11.2 million barrels per day in November. It is expected to drop to 11 million barrels per day by the second quarter of 2021, as new drilling activity will not generate enough production to offset declines in existing wells. Production is expected to reach 11.3 million barrels per day in the fourth quarter of 2021.
In October, Henry Hub’s spot prices rose 47 cents to $ 2.39 per million British thermal units, from $ 1.92 per million British thermal units in September. The spot price is expected to average $ 3.42 per million UK thermal units in January due to growing domestic demand for natural gas for space heating, rising exports of liquefied natural gas (LNG ) of the United States and reduction in production. Monthly average spot prices are expected to remain above $ 3 per million UK thermal units throughout 2021. Spot prices are expected to average $ 3.14 per million UK thermal units in 2021, up from 2 , $ 14 per million British thermal units in 2020.
“The EIA estimates that operational storage of natural gas in the United States reached the second-highest level on record at the end of October, up 5% from the previous five-year average (2015- 19), ”Capuano said. “Less production this winter compared to last year will contribute to inventory withdrawals above the five-year average this heating season. With these larger withdrawals, we expect inventory levels to end the winter in March 16% lower than the five-year average. “
Consumption of natural gas in the United States is expected to decline 1.7% to 83.7 billion cubic feet per day in 2020, starting in 2019, due to lower heating demand in early 2020. Consumption is expected to decline 5.2% to 79.4 billion cubic feet per day in 2021, starting in 2020. The decline in 2021 can be attributed to rising natural gas prices which will reduce demand for natural gas in the industry. electrical energy.
U.S. production of dry natural gas is expected to fall to 91 billion cubic feet per day in 2020, from 93.1 billion cubic feet per day in 2019. Production will begin to increase in the second quarter of 2021 in response to higher prices. natural gas and crude oil. Rising crude oil prices are expected to increase associated gas production from oil-directed wells in late 2021, particularly in the Permian region.
“In October, US LNG exports experienced the largest month-over-month increase since the United States began exporting LNG in 2016,” Capuano said. “The EIA expects LNG exports to return to end-2019 levels in November. We forecast that exports will increase by 31% from 2020 to 2021. ”
Electricity use in the United States is expected to decline 3.6% in 2020. Warmer winter temperatures earlier this year contributed to lower residential consumption for space heating. This was offset by increased demand for summer air conditioning and increased electricity consumption by more people working and attending home classes. Consumption is expected to increase by 0.9% in 2021 due to increased demand for space heating which will be partially offset by lower cooling demand in the third quarter.
The US electric power sector is expected to increase its share of power generation from natural gas-fired power plants to 39% in 2020, from 37% in 2019. This share is expected to drop to 33% due to higher prices. price of natural gas. The share of coal is expected to fall to 20% in 2020, from 24% in 2019. It is expected to rise to 25% in 2021. Electricity production from renewable sources is expected to rise to 20% in 2020, from 18% in 2019 It is expected to rise to 22% in 2021. Nuclear production is expected to be around 20% in 2020 and 2021.
In 2020, coal production is expected to decrease by 26%, but in 2021 it will increase by 20%. This is the result of the increase in natural gas prices which has shifted the demand towards coal in the electric power sector.
“In 2020, the EIA predicts that energy-related CO2 emissions in the United States will be 10% lower than last year due to reduced consumption of all fossil fuels,” said Capuano. “The EIA expects emissions to increase 6% in 2021 as the economy recovers and energy use increases.”