Fuel Projection Report: August 2019

Brent crude oil spot prices averaged $64 per barrel (b) in July, almost unchanged from the average in June 2019 but $10/b lower than the price in July of last year. The Energy Information Administration (EIA) forecasts Brent spot prices will average $64/b in the second half of 2019 and $65/b in 2020. The forecast of stable crude oil prices is the result of the EIA’s expectations of a relatively balanced global oil market. The EIA forecasts global oil inventories will increase by 0.1 million barrels per day (b/d) in 2019 and 0.3 million b/d in 2020.

U.S. regular gasoline retail prices averaged $2.74 gallon (gal) in July, up 2 cents/gal from June but 11 cents/gal lower than the average in July of last year. The EIA expects that monthly average gasoline prices peaked for the year in May at an average of $2.86/gal and will fall to an average of $2.64/gal in September. The EIA expects regular gasoline retail prices to average $2.62/gal in 2019 and $2.71/gal in 2020.

The EIA estimates that U.S. crude oil production averaged 11.7 million b/d in July, down by 0.3 million b/d from the June level. The declines were mostly in the Federal Gulf of Mexico (GOM), where operators shut platforms for several days in mid-July because of Hurricane Barry. The EIA estimates that GOM crude oil production fell by more than 0.3 million b/d in July. Those declines were partially offset by the Lower 48 States onshore region, which is mostly tight oil production, where supply rose by more than 0.1 million b/d. The EIA expects monthly growth in Lower 48 onshore production to slow during the rest of the forecast period, averaging 50,000 b/d per month from the fourth quarter of 2019 through the end of 2020, down from an average of 110,000 b/d per month from August 2018 through July 2019. The EIA forecasts U.S. crude oil production will average 12.3 million b/d in 2019 and 13.3 million b/d in 2020, both of which would be record levels.

 

Natural Gas Projection

The Henry Hub natural gas spot price averaged $2.37/million British thermal units (MMBtu) in July, down 3 cents/MMBtu from June. However, by the end of the month, spot prices had fallen below $2.30/MMBtu. Based on this price movement and the Energy Information Administration’s (EIA’s) forecast of continued strong growth in natural gas production, the EIA lowered its Henry Hub spot price forecast for the second half of 2019 to an average of $2.36/MMBtu. In the July STEO, the EIA expected prices to average $2.50/MMBtu during this period. The EIA expects natural gas prices in 2020 will increase to an average of $2.75/MMBtu. The EIA’s natural gas production models indicate that rising prices are required in the coming quarters to bring supply into balance with rising domestic and export demand in 2020.

The EIA forecasts the average production of U.S. dry natural gas will be 91.0 billion cubic feet per day (Bcf/d) in 2019, up 7.6 Bcf/d from 2018. The EIA expects monthly average natural gas production to grow in late 2019 and then decline slightly during the first quarter of 2020 as the lagged effect of low prices in the second half of 2019 reduces natural gas-directed drilling. However, the EIA forecasts that growth will resume in the second quarter of 2020, and natural gas production in 2020 will average 92.5 Bcf/d.

 

More Resources

For a deeper understanding of this month’s forecast, access the full fuel projection report and natural gas report from ARI. Got trucks? If your fleet has been grandfathered into the FMCSA’s extension for ELD compliance, read this important reminder for the 2019 U.S. deadline.