EIA: US to regain status as net oil importer in third quarter
The US will regain its status as a net importer of crude oil and petroleum products in the third quarter of 2020 and remain a net importer in most months through the end of the forecast period, the US Energy Information Administration said in its latest Short-Term Energy Outlook.
The forecast is a result of higher net imports of crude oil and lower net exports of petroleum products. Net crude oil imports are expected to increase because as US crude oil production declines, there will be fewer bbl available for export. On the petroleum product side, net exports will be lowest in the third quarter of 2020, when US refinery runs are expected to decline significantly.
It is noteworthy that EIA’s forecasts in the outlook were made assuming no re-implementation of an OPEC+ agreement during the forecast period. If there is ultimately an agreement, the forecast will incorporate that information into its ensuing release, EIA said.
EIA said the April edition of the outlook is subject to heightened levels of uncertainty because the impacts of the 2019 novel coronavirus disease (COVID-19) on energy markets are still evolving.
Brent crude oil prices averaged $32/bbl in March, a decrease of $24/bbl from the average in February and the lowest monthly average since January 2016. EIA forecasts Brent crude oil prices will average $33/bbl in 2020, $10/bbl lower than in last month’s STEO and down from an average of $64/bbl in 2019. Average Brent prices will rise to an average of $46/bbl in 2021, $10/bbl lower than forecast last month, as a return to declining global oil inventories puts upward pressure on prices.
Global oil market
EIA estimates global petroleum and liquid fuels consumption averaged 94.4 million b/d in the first quarter of 2020, a decline of 5.6 million b/d from the same period in 2019.
EIA expects global petroleum and liquid fuels demand will decrease by 5.2 million b/d in 2020 from an average of 100.7 million b/d last year before increasing by 6.4 million b/d in 2021. Lower global oil demand growth for 2020 reflects growing evidence of significant disruptions to global economic activity along with reduced expected travel globally because of COVID-19.
Global liquid fuels inventories will grow by an average of 3.9 million b/d in 2020 after falling by about 200,000 b/d in 2019, EIA forecasts. Inventory builds will be largest in the first half of 2020, rising at a rate of 5.7 million b/d in the first quarter and increasing to builds of 11.4 million b/d in the second quarter as a result of widespread travel limitations and sharp reductions in economic activity.
Firmer demand growth as the global economy begins to recover and slower supply growth will contribute to global oil inventory draws beginning in the fourth quarter of 2020. EIA expects global liquid fuels inventories will decline by 1.7 million b/d in 2021.
US oil
EIA forecasts significant decreases in US liquid fuels demand during the first half of 2020 as a result of COVID-19 travel restrictions and significant disruptions to business and economic activity. EIA expects that the largest impacts will occur in the second quarter of 2020, before gradually dissipating over the course of the next 18 months.
US motor gasoline consumption is expected to fall by 1.7 million b/d from the first quarter of 2020 to an average of 7.1 million b/d in the second quarter, before gradually increasing to 8.9 million b/d in the second half of the year. Jet fuel consumption will fall by 400,000 b/d from the first quarter of 2020 to average 1.2 million b/d in the second quarter. US distillate fuel oil consumption would see a smaller decline, falling by 200,000 b/d to average 3.8 million b/d over the same period.
In 2020, EIA forecasts that US motor gasoline consumption will average 8.4 million b/d, a decrease of 9% compared with 2019, while jet fuel and distillate fuel oil consumption will fall by 10% and 5%, respectively over the same period.
For the April–September 2020 summer driving season, EIA forecasts US regular gasoline retail prices will average $1.58/gal, down from an average of $2.72/gal last summer. For all of 2020, EIA expects US regular gasoline retail prices to average $1.86/gal and gasoline retail prices for all grades to average $1.97/gal.
EIA forecasts US crude oil production will average 11.8 million b/d in 2020, down 500,000 b/d from 2019. In 2021, EIA expects US crude production to decline further by 700,000 b/d. If realized, the 2020 production decline would mark the first annual decline since 2016.
US natural gas
In March, the Henry Hub natural gas spot price averaged $1.74/MMbtu. Warmer-than-normal temperatures in March reduced demand for space heating and put downward pressure on prices.
EIA forecasts that prices will begin to rise at the end of the second quarter of 2020 as US natural gas production declines and natural gas use for power generation increases the demand for natural gas.
EIA forecasts that Henry Hub natural gas spot prices will average $2.11/MMbtu in 2020 and then increase in 2021, reaching an annual average of $2.98/MMbtu because of lower natural gas production compared to 2020.
EIA expects residential consumption of natural gas to average 12.9 bcf/d in 2020, down 5.8% from the 2019 average primarily because of warmer-than-normal weather in the first quarter. Similarly, EIA expects commercial consumption of natural gas to average 9.0 bcf/d in 2020, a decrease of 7.1%, as a result of warm weather and the slowing economy. Industrial natural gas consumption will average 22.9 bcf/d in 2020, about the same as in 2019. The industrial forecast is down from the previously expected 6.5% growth in the March STEO.
US dry natural gas production set a record in 2019, averaging 92.2 bcf/d. EIA forecasts dry natural gas production will average 91.7 bcf/d in 2020, with monthly production falling from an estimated 94.4 bcf/d in March to 87.5 bcf/d in December. Natural gas production declines the most in the Appalachian and Permian regions.
Total US working natural gas in storage ended March at 2.0 tcf, 17% more than the 5-year (2015-19) average. In the forecast, inventories rise by 1.9 tcf during the April through October injection season to reach almost 3.9 tcf on Oct. 31. US LNG exports are expected to average 6.6 bcf/d in the second quarter of 2020 and 6.0 bcf/d in the third quarter of 2020. LNG exports in third-quarter 2020 are 0.3 bcf/d lower compared with the March STEO forecast because of lower expected global demand for natural gas.
