Fuel Projection Report: March 2020

Crude Oil Report

The Energy Information Administration (EIA) delayed the release of the March Short Term Energy Outlook (STEO) update by one day to incorporate recent significant global oil market developments. On March 9, Brent crude oil front-month futures prices fell below $35 per barrel (b), a 24% daily decline and the second largest daily price decline on record. Prices fell following the March 6 meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) and its partner countries, which ended without an agreement on production levels amid market expectations for declining global oil demand growth in the coming months. In addition to the following highlights, the EIA has provided a short summary of the March STEO forecast in the crude oil section of the Petroleum and Natural Gas Markets Review (PNGMR).

The EIA forecasts OPEC crude oil production will average 29.2 million barrels per day (b/d) from April through December 2020, up from an average of 28.7 million b/d in the first quarter of 2020. The EIA forecasts OPEC crude oil production will rise to an average of 29.4 million b/d in 2021. The OPEC production data in the March STEO includes Ecuador, which finalized its withdrawal from OPEC at the March 6 meeting. Beginning with the April 2020 STEO, the EIA will include Ecuador’s production volumes in non-OPEC data.

The EIA expects global petroleum and liquid fuels consumption will average 99.1 million b/d in the first quarter of 2020, a decline of 0.9 million b/d from the same period in 2019. The EIA expects global petroleum and liquid fuels demand will rise by less than 0.4 million b/d in 2020 and by 1.7 million b/d in 2021. Lower global oil demand growth for 2020 in the March STEO reflects a reduced assumption for global economic growth along with reduced expected travel globally because of the 2019 novel coronavirus disease (COVID-19).

The EIA forecasts Brent crude oil prices will average $43/b in 2020, down from an average of $64/b in 2019. For 2020, the EIA expects prices will average $37/b during the second quarter and then rise to $42/b during the second half of the year. The EIA forecasts that average Brent prices will rise to an average of $55/b in 2021, as declining global oil inventories put upward pressure on prices.

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 February, the Henry Hub natural gas spot price averaged $1.91 per million British thermal units (MMBtu). Warmer-than-normal temperatures in February reduced demand for space heating and put downward pressure on prices. The Energy Information Administration (EIA) forecasts that prices will begin to 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 natural gas. The EIA expects prices to average $2.22/MMBtu in the third quarter of 2020. The EIA forecasts that Henry Hub natural gas spot prices will average $2.11/MMBtu in 2020. The EIA expects that natural gas prices will then increase in 2021, reaching an annual average of $2.51/MMBtu.

U.S. dry natural gas production set a record in 2019, averaging 92.2 billion cubic feet per day (Bcf/d). Although the EIA forecasts dry natural gas production will average 95.3 Bcf/d in 2020, a 3% increase from 2019, the EIA expects monthly production to generally decline through 2020, falling from an estimated 96.5 Bcf/d in February to 92.3 Bcf/d in December. The falling production mostly occurs in the Appalachian and Permian regions. In the Appalachian region, low natural gas prices are discouraging producers from engaging in natural gas-directed drilling, and in the Permian region, low oil prices reduce associated gas output from oil-directed wells. In 2021, the EIA forecasts dry natural gas production will rise from December 2020 levels in response to higher prices. Forecast dry natural gas production for 2021 averages 92.6 Bcf/d

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