Global liquid fuels production will average 101.8 million b/d in 2019 and 103.5 million b/d in 2020, and consumption will average 101.5 million b/d in 2019 and 103.1 million b/d in 2020, which will contribute to modest inventory builds in both years, according to the US Energy Information Administration’s latest Short-Term Energy Outlook. The STEO for January is the first to include forecasts for 2020.
EIA also forecasts that Brent prices will average $61/bbl in 2019 and $65/bbl in 2020. In 2018, Brent prices averaged $71/bbl. West Texas Intermediate crude oil prices will average $8/bbl lower than Brent prices in this year’s first quarter before the discount gradually falls to $4/bbl in the fourth quarter and throughout 2020.
Global oil consumption
Global consumption of petroleum and other liquid fuels increased by 1.4 million b/d in 2018, reaching an average of 100 million b/d for the year, according to EIA. EIA expects consumption growth to average slightly above 1.5 million b/d in 2019 and in 2020.
The relatively stable consumption growth reflects small forecast declines in the rate of global gross domestic product growth from 2018, which EIA expects will be generally offset by lower oil prices in 2019 and 2020 compared with 2018, along with increases in petrochemical related demand and IMO-related volume gain.
Non-OECD liquid fuels consumption growth accounts for 1.1 million b/d of the global growth in 2019 and 1.2 million b/d in 2020, with China and India accounting for most of this growth.
China’s consumption will increase by 500,000 b/d in 2019 and in 2020, according to EIA. EIA does not expect growth in Chinese oil consumption to slow by as much as slowing GDP growth because of the addition of many petrochemical plants, which will add an estimated 75,000 b/d of consumption in 2019 and an additional 70,000 b/d in 2020.
EIA’s forecast consumption in India grows by more than 200,000 b/d in both 2019 and 2020, driven by rising use of gasoline, jet fuel, and hydrocarbon gas liquids.
OECD petroleum and other liquid fuels consumption is forecast by EIA to grow by 400,000 b/d in 2019 and by 300,000 b/d in 2020. US is the leading contributor to this forecast growth, with consumption rising by 300,000 b/d in 2019 and by 200,000 b/d in 2020. EIA forecasts that Europe’s liquid fuels consumption will grow by 90,000 b/d in 2019 and in 2020. Japan is expected to see liquid fuels consumption decline by an average of 80,000 b/d in both years.
Non-OPEC oil supply
EIA estimates that non-OPEC petroleum and other liquid fuels supply increased by 2.5 million b/d in 2018. Production growth of 2.2 million b/d in US accounted for most of the 2018 supply growth, with Canada, Russia, Kazakhstan, and Brazil collectively adding an additional 600,000 b/d.
EIA expects non-OPEC production to rise by 2.4 million b/d in 2019 and by 1.9 million b/d in 2020. Forecast growth in US contributes 1.7 million b/d and 1.2 million b/d, respectively, in each year, with Brazil providing another 300,000 b/d in 2019 and 200,000 b/d in 2020.
EIA forecasts US crude oil production to average 12.1 million b/d in 2019 and 12.9 million b/d in 2020, up from 10.9 million b/d in 2018, with most of the growth coming from the Permian region of Texas and New Mexico.
EIA expects Canada’s total liquid fuels production to decrease by 100,000 b/d in 2019 as a result of government-mandated production cuts in Alberta. In 2020, Canadian production will increase by 200,000 b/d after the cuts end in late 2019, driven by oil sands projects.
EIA expects Brazil’s production to grow by more than 300,000 b/d in 2019 and by 200,000 b/d in 2020, supported by the additions of floating production, storage, and offloading vessels, continued emphasis on the development of presalt resources and implementation of previous reforms.
EIA expects that Russia will gradually reduce production from record high levels during the first several months of 2019. However, production growth in Russia will resume in the second half of 2019 and continue into 2020.
Another source of growth for non-OPEC production in the forecast period is Kazakhstan, where EIA forecasts production to ramp up in 2019 to peak production levels at the Kashagan field.
Norway’s production is expected to be mostly flat in 2019 and then increase by 100,000 b/d in 2020 when the Martin Linge field and a number of smaller fields are scheduled to come online. Phase 1 of the Johan Sverdrup field, scheduled to come online by the end of 2019, drives most of the production growth in 2020.
Australia, Qatar, and UK are also expected to increase liquid fuels production in the forecast.
The largest declines among non-OPEC producers are to be in Mexico, Indonesia, and Egypt.
OPEC production
EIA expects that OPEC crude oil output will decrease by 1 million b/d on average in 2019 and will remain flat in 2020. Qatar left OPEC effective on January 1, 2019. Starting with this edition of STEO, Qatar’s oil production will be included in the non-OPEC data for both history and forecast.
Iraq is one of the main sources of production growth among OPEC members in the forecast period. EIA expects increasing production capacity at the northern Kirkuk fields and a resumption of Baghdad-administered exports through the Iraqi-Kurdistan pipeline will help alleviate export capacity issues and contribute to production growth.
By December 2018, Iranian crude oil production had declined by more than 1 million b/d from first quarter of 2018. As domestic Iranian consumption grew concurrently, Iran’s exports have also fallen at a faster rate than production. EIA assumes that US sanctions on Iranian oil exports will remain in place through the end of the forecast period.
On average, Saudi Arabia produced 10.4 million b/d in 2018, and EIA forecasts average Saudi production to fall below that level in 2019 and in 2020 as it complies with the latest OPEC+ production cut agreement.
As of December 2018, Venezuela’s crude oil production stood at about 1.2 million b/d, near its lowest level since early 2003. EIA expects Venezuela’s production to continue to fall through the forecast period.
In Africa, EIA expects production to increase in Angola and Nigeria through 2020. Angola’s Kaombo field began production in 2018, with the second phase set to begin production in early 2019, and the Vandumbu field also came online in late 2018 ahead of schedule. Nigeria is expected to begin production at its offshore Egina project in early 2019.
Although Libya’s 2018 production level was the highest since 2012, supply disruptions will remain a significant risk during the forecast unless the security situation in the country improves.
OPEC non-crude oil liquids production averaged 5.3 million b/d in 2018 and EIA forecasts that it will remain roughly flat in 2019, and then decrease by 200,000 b/d in 2020.
EIA expects that excluding Iran, OPEC surplus crude oil production capacity, which averaged 1.5 million b/d in 2018, will increase to 1.9 million b/d in 2019 and to 2.3 million b/d in 2020.
US oil market
EIA forecasts that total US oil consumption will average 20.8 million b/d in 2019, an increase of 310,000 b/d (1.5%) from the 2018 level. Consumption is forecast to grow by 240,000 b/d (1.1%) in 2020.
Higher forecast consumption of hydrocarbon gas liquids (HGL) is the primary reason for the growth. Ethane, used as a petrochemical feedstock, is expected to be responsible for most of the growth in HGL consumption.
Motor gasoline consumption is forecast by EIA to increase slightly in 2019, supported by an 8.3% lower gasoline price and growth in income and employment, averaging more than 9.3 million b/d. In 2020, higher gasoline prices and rising vehicle fuel efficiency will offset employment growth effects and keeps forecast gasoline demand unchanged compared with 2019.
Distillate fuel consumption is expected to rise by 0.6% in 2019 and 0.7% in 2020, averaging about 4.2 million b/d in both years. In 2019, rising distillate fuel consumption results from forecast economic growth. In 2020, distillate consumption growth reflects expectations of rising economic growth, along with a small expected shift to use of marine diesel for bunkering purposes as a result of IMO regulations.
EIA forecasts US jet fuel consumption to rise by 4.2% in 2019 and by 1.3% in 2020, reaching more than 1.8 million b/d, thanks to rising disposable income.
On the production side, EIA expects the Permian region to produce 4.8 million b/d of crude oil by the end of 2020, which is about 1 million b/d more than estimated December 2018 levels and would represent about 36% of total US crude oil production at the end of 2020. However, the forecast annual growth rate in 2019 is 600,000 b/d, which is 400,000 b/d slower than in 2018, due to increasing pipeline capacity constraints in the Permian region. However, with the expectation that pipeline capacity constraints will be alleviated in the second half of 2019, EIA forecasts that growth will accelerate on a monthly basis into 2020.
EIA forecasts HGL production will increase from an estimated 4.4 million b/d in 2018 to 5 million b/d in 2019 and to 5.3 million b/d in 2020, along with growth in natural gas production and natural gas processing plant capacity. EIA expects ethane to contribute nearly half of the 900,000 b/d HGL production growth between 2018 and 2020.
US crude oil and petroleum product net imports are estimated to have fallen from an average of 3.8 million b/d in 2017 to an average of 2.4 million b/d in 2018. EIA forecasts that net imports will continue to fall to an average of 1.1 million b/d in 2019, and to less than 100,000 b/d in 2020. In the fourth quarter of 2020, EIA forecasts US will be a net exporter of crude oil and petroleum products, by about 900,000 b/d.
