The US Energy Information Administration (EIA), in its April short-term energy outlook (STEO), expects that the coronavirus pandemic would cause a 5.2 million bpd contraction in global demand for petroleum and liquid fuels in 2020 from 100.7 million b/d in 2019. The outlook predicts that demand will then increase by 6.4 million b/d in 2021. EIA also cuts its estimates for global demand for petroleum and liquid fuels for Q1 2020 to 94.4 million bpd, representing a decline of 5.6 million b/d from the same period last year.
The agency blamed the slowdown in global economic growth and reduced expected travel due to the COVID-19 pandemic for the contraction in demand. In the forecast, EIA assumes that OPEC+ will not re-implement its supply cut pact, although it will meet on Thursday to decide its future production policy.
Average Brent crude oil prices fell by $24/barrel from February to $32/barrel last month, the lowest monthly average in more than 4 years. Brent crude oil prices are expected to average $33/barrel this year. This is $10/barrel lower than in March STEO and down from last year’s average of $64/barrel. EIA projects prices will average $23/barrel Q2 2020 and then rise to $30/barrel in H2 and to $46/barrel in 2021. These estimated prices are $10/barrel lower than in March STEO.
EIA said that global liquid fuel inventories fell by about 0.2 million bpd in 2019, but in 2020, stocks are expected to increase by an average of 3.9 million bpd. Inventories are expected to have grown by 5.7 million bpd in Q1 2020 and accelerated by 11.4 million bpd in Q2 due to economic slowdown and weak demand amid virus containment measures. The build is expected to slow down in H2 as the global economy strengthens. Global liquid fuel inventories will fall by 1.7 million bpd next year, EIA said.
EIA expects crude production in the US to fall by 0.5 million bpd from 2019 to an average of 11.8 million bpd this year, marking the first annual output decline since 2016. US oil output is then expected to decline further by 0.7 million bpd in 2021. EIA attributed the production drop in 2021 to the lower oil prices, combined with the COVID-19 pandemic.
