Fuel Projection Report: June 2021

At A Glance

Brent crude oil spot prices averaged $68 per barrel (b) in May, up $4/b from April. We expect Brent prices will remain near current levels in 3Q21, averaging $68/b. We expect Brent to average $60/b in 2022.

We expect U.S. gasoline consumption will average 9.1 million barrels per day (b/d) this summer (April–September), which is 1.3 million b/d more than last summer but still more than 0.4 million b/d less than summer 2019. We expect U.S. gasoline consumption to average 8.7 million b/d in for all of 2021.

For the 2021 April–September summer driving season, we forecast U.S. regular gasoline retail prices will average $2.92 per gallon (gal), up from an average of $2.07/gal last summer. For all of 2021, we expect U.S. regular gasoline retail prices to average $2.77/gal.

Refer to the detailed Crude Oil Report below for more details.

Do you want to estimate what fuel will cost your fleet next month? Try our fuel cost estimator.

In May, the natural gas spot price at Henry Hub averaged $2.91 per million British thermal units (MMBtu), which is up from the April average of $2.66/MMBtu. We expect the Henry Hub spot price will average $2.92/MMBtu in 3Q21 and $3.07/MMBtu for all of 2021.

We expect that U.S. consumption of natural gas will average 82.9 billion cubic feet per day (Bcf/d) in 2021.

We estimate that natural gas inventories ended May 2021 at almost 2.4 trillion cubic feet (Tcf). We forecast that inventories will end the 2021 injection season (end of October) at 3.6 Tcf.

Refer to the detailed Natural Gas Report below for more details.

Crude Oil Report

The June Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty related to the ongoing economic recovery from the COVID-19 pandemic. The U.S. economy continues to rise after reaching multiyear lows in the second quarter of 2020. The increase in economic activity and easing of the COVID-19 pandemic have contributed to rising energy use.

U.S. gross domestic product (GDP) declined by 3.5 percent in 2020 from 2019 levels. This STEO assumes U.S. GDP will grow by 6.7 percent in 2021 and by 4.9 percent in 2022. The U.S. macroeconomic assumptions in this outlook are based on forecasts by IHS Markit. Our forecast assumes continuing economic growth and increasing mobility as a result of the easing of the COVID-19 pandemic. Any developments that would cause deviations from these assumptions would likely cause energy consumption and prices to deviate from our forecast.

Brent crude oil spot prices averaged $68 per barrel (b) in May, up $4/b from April. Brent prices were higher in May as global oil inventories continued to decline, albeit at a slower pace than in the first four months of the year.

In the coming months, we expect that global oil production will increase to match rising levels of global oil consumption. The rising oil production in the forecast is largely a result of the OPEC+ decision to raise production. We expect rising production will end the persistent global oil inventory draws that have occurred for much of the past year and lead to relatively balanced global oil markets in the second half of 2021.

We expect Brent prices will remain near current levels in 3Q21, averaging $68/b. However, in 2022, we expect that continuing growth in production from OPEC+ and accelerating growth in U.S. tight oil production—along with other supply growth—will outpace decelerating growth in global oil consumption and contribute to declining oil prices. Based on these factors, we expect Brent to average $60/b in 2022.

We expect U.S. gasoline consumption will average 9.1 million barrels per day (b/d) this summer (April–September), which is 1.3 million b/d more than last summer but still more than 0.4 million b/d less than summer 2019. Weekly consumption data reflect the Colonial Pipeline outage and subsequent increase in gasoline demand, but consumption both before and after this event indicate more gasoline demand than we had previously forecasted.

Our latest forecast also reflects IHS Markit’s increased employment forecast. We expect U.S. gasoline consumption to average 8.7 million b/d in for all of 2021 and 9.0 million b/d in 2022.

For the 2021 April–September summer driving season, we forecast U.S. regular gasoline retail prices will average $2.92 per gallon (gal), up from an average of $2.07/gal last summer. The higher forecast gasoline prices reflect higher crude oil prices and higher wholesale gasoline margins. Wholesale gasoline margins have risen as a result of relatively low inventories and rising gasoline demand.

Margins also temporarily widened because of outages on the Colonial Pipeline. These developments caused U.S. average regular gasoline retail prices to reach a monthly average of $2.99/gal in May, peaking at $3.03/gal on May 17, which were the highest monthly and weekly prices since 2014. We expect that prices will average $3.03/gal in June before falling to $2.76/gal by September.

The drop in forecast retail gasoline prices reflects our forecast that gasoline margins will fall this summer in response to rising refinery utilization. For all of 2021, we expect U.S. regular gasoline retail prices to average $2.77/gal and gasoline retail prices for all grades to average $2.87/gal. Higher prices and more gasoline consumption would result in the average U.S. household spending about $570 (38 percent) more on motor fuel in 2021 compared with 2020.

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

Do you want to estimate what fuel will cost your fleet next month? Try our fuel cost estimator.

Natural Gas Report

In May, the natural gas spot price at Henry Hub averaged $2.91 per million British thermal units (MMBtu), which is up from the April average of $2.66/MMBtu. We expect the Henry Hub spot price will average $2.92/MMBtu in 3Q21 and $3.07/MMBtu for all of 2021, which is up from the 2020 average of $2.03/MMBtu.

Higher natural gas prices this year primarily reflect two factors: growth in liquefied natural gas (LNG) exports and rising domestic natural gas consumption outside of the power sector. In 2022, we expect the Henry Hub price will average $2.93/MMBtu amid slowing growth in LNG exports and rising U.S. natural gas production.

We expect that U.S. consumption of natural gas will average 82.9 billion cubic feet per day (Bcf/d) in 2021, down 0.5 percent from 2020. U.S. natural gas consumption declines in the forecast, in part, because electric power generators switch to coal from natural gas as a result of rising natural gas prices.

In 2021, we expect residential and commercial natural gas consumption combined will rise by 1.2 Bcf/d from 2020 and industrial consumption will rise by 0.7 Bcf/d from 2020. Rising consumption outside of the power sector results from expanding economic activity and colder winter temperatures in 2021 compared with 2020. We expect U.S. natural gas consumption will average 82.8 Bcf/d in 2022.

We estimate that natural gas inventories ended May 2021 at almost 2.4 trillion cubic feet (Tcf), which is three percent lower than the five-year (2016–20) average. More natural gas was withdrawn from storage during the winter of 2020–21 than the previous five-year average, largely as a result of the colder-than-average February temperatures that contributed to a drop in natural gas production. We forecast that inventories will end the 2021 injection season (end of October) at 3.6 Tcf, which would be four percent below the five-year average.

Following a significant weather-related decline in U.S. natural gas production in February, U.S. dry natural gas production rose by 6.0 Bcf/d in March to 92.3 Bcf/d. We expect dry natural gas production will average 92.9 Bcf/d in 2H21 and then rise to 93.9 Bcf/d in 2022.

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