Fuel Projection Report- July 2020

Crude Oil Report

Daily Brent crude oil spot prices averaged $40 per barrel (b) in June, up $11/b from the average in May and up $22/b from the multiyear low monthly average price in April. Oil prices rose in June as numerous regions worldwide began to lift stay-at-home orders and as global oil supply fell as a result of production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+). In June, OPEC+ announced that they extended through July their period of deepest cuts that had been set to relax on July 1. The Energy Information Administration (EIA) expects monthly Brent spot prices will average $41/b during the second half of 2020 and rise to an average of $50/b in 2021, $4/b and $2/b higher than forecast in last month’s Short-Term Energy Outlook (STEO), respectively.

The forecast of rising crude oil prices reflects the EIA’s expectation of declines in global oil inventories during the second half of 2020 and through 2021. 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 6.7 million barrels per day (b/d) in the first half of 2020 and expects they will decline at a rate of 3.3 million b/d in the second half of 2020 and then decline by a further 1.1 million b/d in 2021.

The EIA forecasts U.S. liquid fuels consumption will average 18.3 million b/d in 2020, down 2.1 million b/d from 2019. Declines in U.S. liquid fuels consumption vary across products. From 2019 to 2020, the EIA expects jet fuel consumption to fall by 31% and gasoline and distillate fuel consumption to both fall by 10%. The declines reflect travel restrictions and reduced economic activity related to COVID-19 mitigation efforts. The EIA expects the largest declines in U.S. liquid fuels consumption have already occurred and consumption will generally rise through the second half of 2020 and in 2021. The EIA forecasts U.S. liquid fuels consumption will average 19.9 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

The Energy Information Administration (EIA) expects U.S. natural gas consumption will decline by 3% in 2020. The main driver of the decline is lower consumption in the industrial sector because of COVID-19 mitigation efforts and related reductions in economic activity. Forecast U.S. natural gas consumption declines by 5% in 2021 as a result of expected rising natural gas prices. The rising prices will reduce the use of natural gas in the electric power sector, which will more than offset increases in natural gas consumption in the industrial, commercial, and residential sectors.

The EIA expects U.S. dry natural gas production to average 89.2 billion cubic feet per day (Bcf/d) in 2020, down from 92.2 Bcf/d in 2019. This 3% decrease is the result of falling natural gas prices that caused a decline in drilling activity and production curtailments. The EIA expects annual average dry natural gas production in the United States will decline by 6% in 2021 to 84.2 Bcf/d. However, the EIA expects production to increase during the second half of 2021 as natural gas prices in the forecast rise.

The Henry Hub natural gas spot price averaged $1.63 per million British thermal units (MMBtu) in June, the lowest inflation-adjusted price going back to at least 1989, as a result of low demand. The EIA expects falling production will put upward pressure on natural gas prices through the end of 2021. The EIA forecasts that Henry Hub spot prices will average $1.93/MMBtu in 2020 and $3.10/MMBtu in 2021.

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