An average of 95.3 million b/d of petroleum and liquid fuels was consumed globally in October, the US Energy Information Administration (EIA) estimated in its November Short-Term Energy Outlook. Liquid fuels consumption was down 5.9 million b/d from October 2019, but 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. Meantime, EIA expects global oil consumption will average 97.3 million b/d in the fourth quarter through first-half 2021, 400,000 b/d lower than the October report forecast. (EIA hadn’t taken into account the impact of initially promising COVID-19 vaccine data from Pfizer and BioNTech.)
Brent crude oil spot prices averaged $40/bbl in October, down $1/bbl from the September average as disrupted crude oil production in Libya returned and COVID-19 cases began to increase in many countries.
The pace of oil demand recovery will affect not only expectations of petroleum inventory withdrawals, but also could affect planned oil supply increases from members of the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+), who are scheduled to meet Nov. 30. OPEC+ members currently plan to increase crude oil production by nearly 2.0 million b/d in January 2021. EIA forecasts that OPEC+ production will generally be tailored to match the pace of global oil demand recovery.
As a result of EIA’s reduced demand growth expectations, EIA forecasts closer adherence to announced production targets from OPEC. EIA forecasts first-half 2021 crude oil production for OPEC will be 27.9 million b/d, 500,000 b/d lower than the October STEO. The lower forecast comes despite EIA’s assumption of higher production in Libya during early-2021.
Despite these developments, 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/bbl through end-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/bbl in 2021.
In August, 10.6 million b/d of crude oil was produced in the US (the most recent month for historical data), down 400,000 b/d from July, mainly due to hurricane disruption in Gulf of Mexico, where US crude oil production averaged 1.2 million b/d in August, down 500,000 b/d from July.
Since reaching a 2 1/2-year low of 10.0 million b/d in May, when producers curtailed wells, US crude oil production has increased mainly because tight oil operators have brought wells back online with rising prices. EIA estimates production will rise to 11.2 million b/d in November. However, it expects US crude oil production to generally decline to an average of 11.0 million b/d in second-quarter 2021 because new drilling activity will not generate enough production to offset declines from existing wells. Drilling activity is expected to rise later in 2021, contributing to US crude oil production reaching 11.3 million b/d in fourth-quarter 2021. On an annual average basis, EIA expects US 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.