The US Energy Information Administration (EIA), in its July short-term energy outlook (STEO), said US crude oil production and demand would fall in 2020 amid due to low demand and weak economic outlook caused by the coronavirus pandemic. EIA said the forecasts were based on the assumption that US GDP would contract by 6.4% in the first half of 2020 and are subject to heightened levels of uncertainty caused by the health crisis.
EIA projects US crude oil production to average 11.6 million bpd in 2020 and 11.0 million bpd in 2021, falling from last year’s average of 12.2 million bpd. Meanwhile, US oil demand will likely be impacted by lower liquid fuels consumption, which EIA forecast to fall by 2.1 million bpd from 2019 to 18.3 million bpd in 2020. Travel restrictions and reduced traffic are expected to cause a 31% fall in jet fuel demand and a 10% drop in gasoline and distillate fuel consumption. US liquid fuels consumption has passed the worst and is expected to gradually recover through the second half of 2020 and reach 19.9 million bpd in 2021.
EIA predicts that Brent spot prices will average $41/barrel in the second half of 2020 and rise to an average of $50/b next year. Both price projections are $4/barrel and $2/barrel higher than EIA’s previous forecast in June. The gradual exit from the coronavirus containment measures and the record supply cuts by OPEC+ have supported prices to emerge from the multi-year low in April.
Meanwhile, US dry natural gas production is forecast to average 89.2 Bcfd this year, down about 3% from 92.2 Bcfd last year. EIA attributes the decline to falling gas prices which led to production curtailments and slower drilling activity. Gas production is expected to decline further by 6% to 84.2 Bcfd in 2021. Natural gas spot prices at the Henry Hub averaged $1.63/MMBtu in June, the lowest inflation-adjusted price since 1989. Prices are expected to firm by the end of 2021 thanks to lower production. EIA forecasts that Henry Hub spot gas prices will increase to an average of $1.93/MMBtu in 2020 and $3.10/MMBtu in 2021.
EIA said US coal production would fall by 29% to 501 MMst in 2020, dragged by lower demand form the electric power generation. EIA estimates the share of coal to total utility-scale electricity generation in the US to decrease from 24% in 2019 to 18% in 2020 but then increases to 21% in 2021. The share of natural gas-generated electricity is expected to rise from 37% in 2019 to 41% in 2020 but then fall to 36% in 2021 due to higher gas prices. The nuclear share will likely remain at 21% in 2020 and 2021. Solar, wind, and other non-hydropower renewables contributed to 9% of US electricity in 2018, and are expected to rise from 17% in 2019 to 20% in 2020 and to 22% in 2021.
EIA expects a 4.2% drop in US electricity consumption this year, with retail electricity sales to the commercial sector seen to decrease by 7.0% amid COVID-19 prevention measures. EIA estimates that energy-related CO2 emissions in the US will decline by 12.2% in 2020 and increase by 6.0% in 2021. However, this forecast is highly dependent on the economic impact and subsequent recovery after the pandemic.
