Fuel Projection- August 2020

Crude Oil Report

The August Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty because mitigation and reopening efforts related to the 2019 novel coronavirus disease (COVID-19) continue to evolve. Reduced economic activity related to the COVID-19 pandemic has caused changes in energy demand and supply patterns in 2020. Uncertainties persist across the U.S. Energy Information Administration’s (EIA) outlook for all energy sources, including liquid fuels, natural gas, electricity, coal, and renewables. The STEO is based on U.S. macroeconomic forecasts by IHS Markit, which assume U.S. gross domestic product declined by 5.2% in the first half of 2020 from the same period a year ago and will rise from the third quarter of 2020 through 2021.

Daily Brent crude oil spot prices averaged $43 per barrel (b) in July, up $3/b from the average in June and up $25/b from the multiyear low monthly average price in April. The EIA expects monthly Brent spot prices will average $43/b during the second half of 2020 and rise to an average of $50/b in 2021.

U.S. regular gasoline retail prices averaged $2.18 per gallon (gal) in July, an increase of 10 cents/gal from the average in June but 56 cents/gal lower than at the same time last year. The EIA expects that gasoline prices will gradually decrease through the rest of the summer to reach an average of $2.04/gal in September before falling to an average of $1.99/gal in the fourth quarter. Forecast U.S. regular gasoline retail prices will average $2.23/gal in 2021, compared with an average of $2.12/gal in 2020.

The EIA expects high inventory levels and surplus crude oil production capacity will limit upward price pressures in the coming months, but as inventories decline into 2021, those upward price pressures will increase. The EIA estimates global liquid fuels inventories rose at a rate of 6.4 million barrels per day (b/d) in the first half of 2020 and expects they will decline at a rate of 4.2 million b/d in the second half of 2020 and then decline by 0.8 million b/d in 2021.

We hope this forecast summary has been helpful. You can download this month’s full Fuel Projection Report in the following formats:

Natural Gas Report

In July, the Henry Hub natural gas spot price averaged $1.77 per million British thermal units (MMBtu). The Energy Information Administration (EIA) expects natural gas prices will generally rise through the end of 2021 but the sharpest increases will be during this fall and winter when they rise from an average of $2.11/MMBtu in September to $3.14/MMBtu in February. The EIA expects that rising demand heading into winter, combined with reduced production, will cause upward price pressures. The EIA forecasts that Henry Hub natural gas spot prices will average $2.03/MMBtu in 2020 and $3.14/MMBtu in 2021.

The EIA expects that total U.S. consumption of natural gas will average 82.4 billion cubic feet per day (Bcf/d) in 2020, down 3.0 percent from 2019. The largest decline in consumption occurs in the industrial sector, which the EIA forecasts will average 22.0 Bcf/d in 2020, down 1.0 Bcf/d from 2019, as a result of reduced manufacturing activity. The decline in total U.S. consumption also reflects lower heating demand in early 2020, contributing to residential and commercial demand in 2020 averaging 12.8 Bcf/d (down 0.9 Bcf/d from 2019) and 8.8 Bcf/d (down 0.8 Bcf/d from 2019), respectively.

We hope this forecast summary has been helpful. You can download this month’s full Natural Gas Report in the following formats: