Fuel Projection Report
The Energy Information Administration (EIA) expects global petroleum and liquid fuels demand will average 100.3 million barrels per day (b/d) in the first quarter of 2020. This demand level is 0.9 million b/d less than forecast in the January STEO and reflects both the effects of the coronavirus and warmer-than-normal January temperatures across much of the northern hemisphere. The EIA now expects global petroleum and liquid fuels demand will rise by 1.0 million b/d in 2020, which is lower than the forecast increase in the January STEO of 1.3 million b/d in 2020, and by 1.5 million b/d in 2021.
Global liquid fuels inventories fell by roughly 0.1 million b/d in 2019, and the EIA expects they will grow by 0.2 million b/d in 2020. Although the EIA expects inventories to rise overall in 2020, the EIA forecasts inventories will build by 0.6 million b/d in the first half of the year because of slow oil demand growth and strong non-OPEC oil supply growth. Firmer demand growth as the global economy strengthens and slower supply growth later in the year contribute to forecast inventory draws of 0.1 million b/d in the second half of 2020. The EIA expects global liquid fuels inventories will decline by 0.2 million b/d in 2021.
Brent crude oil spot prices averaged $64 per barrel (b) in January, down $4/b from December. Brent prices fell steadily through January and into the first week of February, closing at less than $54/b on February 4, the lowest price since December 2018, reflecting market concerns about oil demand. The EIA forecasts Brent prices will average $61/b in 2020; with prices averaging $58/b during the first half of the year and $64/b during the second half of the year. The EIA forecasts the average Brent prices will rise to an average of $68/b in 2021.
Natural Gas Report
In January, the Henry Hub natural gas spot price averaged $2.02 per million British thermal units (MMBtu), as warm weather contributed to below-average inventory withdrawals and put downward pressure on natural gas prices. As of February 6, the Henry Hub spot price had fallen to $1.86/MMBtu, and the Energy Information Administration (EIA) expects prices will remain below $2.00/MMBtu in February and March. The EIA forecasts that prices will rise in the second quarter of 2020, as U.S. natural gas production declines and natural gas use for power generation increases the demand for gas. The EIA expects prices to average $2.36/MMBtu in the third quarter of 2020. The EIA forecasts that Henry Hub natural gas spot prices will average $2.21/MMBtu in 2020. The EIA expects that natural gas prices will then increase in 2021, reaching an annual average of $2.53/MMBtu.
U.S. dry natural gas production set a record in 2019, averaging 92.1 billion cubic feet per day (Bcf/d). Although the EIA forecasts dry natural gas production will average 94.2 Bcf/d in 2020, a 2% increase from 2019, the EIA expects monthly production to generally decline through 2020, falling from an estimated 95.4 Bcf/d in January to 92.5 Bcf/d in December. The falling production mostly occurs in the Appalachia and Permian regions. In the Appalachia region, low natural gas prices are discouraging natural gas-directed drilling, and in the Permian, low oil prices are expected to reduce associated gas output from oil-directed wells. In 2021, the EIA forecasts dry natural gas production to stabilize near December 2020 levels at an annual average of 92.6 Bcf/d, a 2% decline from 2020, which would be the first decline in annual average natural gas production since 2016.