Fuel Projection Report: October 2019

Fuel Projection Report

The Energy Information Administration (EIA) estimates that crude oil production from the Organization of the Petroleum Exporting Countries (OPEC) averaged 28.2 million barrels per day (b/d) in September. Production was down 1.6 million b/d from August, the lowest level of U.S. Energy Information Administration | Short-Term Energy Outlook October 2019 2 OPEC production since November 2003—as a result of the disruptions in Saudi Arabia—and down 4.0 million b/d from September 2018. The decrease in OPEC crude oil production during the past year was primarily the result of falling production in Iran and Venezuela as well as the recent disruption in Saudi Arabia. However, the EIA estimates that Saudi Arabia’s crude oil production returned to pre-outage levels as of October 3. The EIA forecasts that annual OPEC crude oil production will average 29.8 million b/d in 2019, down by 2.1 million from 2018, and 29.6 million b/d in 2020.

The EIA reported that U.S. crude oil production averaged 11.8 million b/d in July (the most recent month for which data is available), down 0.3 million b/d from June. Declining production was a result of Hurricane Barry, which disrupted crude oil production in the Gulf of Mexico. U.S. crude oil production remained relatively flat during the first seven months of 2019 because of disruptions to Gulf of Mexico platforms and slowing growth in tight oil production. The slowing rate of growth in tight oil production reflects relatively flat crude oil price levels and slowing growth in well-level productivity in the lower 48 states. However, the EIA expects growth to pick up in the fourth quarter as production returns in the Gulf of Mexico and pipelines in the Permian Basin come online to link production areas in West Texas and New Mexico to refining and export centers on the Gulf Coast. However, the EIA forecasts growth to level off in 2020 because of falling crude oil prices in the first half of the year and continuing declines in well-level productivity. The EIA forecasts U.S. crude oil production will average 12.3 million b/d in 2019, up 1.3 million from the 2018 level, and will rise by 0.9 million b/d in 2020 to an annual average of 13.2 million b/d.

Natural Gas Report

The Henry Hub natural gas spot price averaged $2.56 per million British thermal units (MMBtu) in September, up 34 cents/MMBtu from August, which was the first monthly price increase since March. EIA forecasts Henry Hub prices to average $2.43/MMBtu in the fourth quarter of 2019, a decrease of more than $1/MMBtu from the fourth quarter of 2018, subsequently increasing to an average of $2.52/MMBtu in 2020. U.S. natural gas prices have fallen in 2019 because of strong supply growth that has enabled natural gas inventories to build more than average during the April through October injection season.

The Energy Information Administration (EIA) forecasts that average annual U.S. dry natural gas production will average 91.6 billion cubic feet per day (Bcf/d) in 2019, up 10% from the 2018 average. The EIA expects that natural gas production will grow much less in 2020 because the delayed effect of low prices in the second half of 2019 will reduce natural gas-directed drilling in 2020. The EIA forecasts natural gas production in 2020 will average 93.5 Bcf/d.

More Resources

For a deeper understanding of this month’s forecast, access this fleet industry perspective, fuel projection report and natural gas report from ARI. Feeling risk averse? “A well-managed fleet is also a financial asset to your entire business…” Check ARI’s checklist: Is Risk Management Right for You? Find more resources for learning about how your fleet is an investment. Visit our Fleet Investment video, whitepaper and customer story library.