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EIA: production forecast to exceed demand Agency sees $70 Brent in 2022; increased 2021 prices tied to draws on inventories; increased OPEC, US production expected in 2022
Kristen Nelson Petroleum News
The U.S. Energy Information Administration is forecasting $70 Brent next year, based on expected growth in production from the Organization of the Petroleum Exporting Countries and OPEC+, along with increased U.S. tight oil production and increased production from other non-OPEC nations. That growth in production, EIA said in its December Short-Term Energy Outlook, released Dec. 7, is expected to “outpace slowing growth in global oil consumption, especially in light of renewed concerns about COVID-19 variants.”
EIA said Brent crude oil prices averaged $81 per barrel in November, down $3 from October, but up $38 per barrel from November 2020, with the steady increase in crude oil prices over the last year attributed to draws on global oil inventories. On Nov. 26 prices fell significantly following identification of the new COVID-19 Omicron variant as a variant of concern.
“This is a very complicated environment for the entire energy sector,” said EIA Acting Administrator Steve Nalley. “Our forecasts for petroleum and other energy prices, consumption, and production could change significantly as we learn more about how responses to the Omicron variant could affect oil demand and the broader economy.”
The agency said it expects Brent to average $71 per barrel in December and $73 per barrel in the first quarter of 2022 and expects it to remain near current levels next year, averaging $70 per barrel.
U.S. crude production is estimated at 11.7 million barrels per day in November, EIA said, and is forecast to rise to an average of 11.8 million bpd next year, averaging 12.1 million bpd in the fourth quarter of 2022.
Natural gas The Henry Hub spot price for natural gas averaged $5.05 per million British thermal units in November, down from an October average of $5.51 but up from an average $3.25 in the first half of the year. EIA said global demand for U.S. liquefied natural gas has remained high, “limiting some downward pressure on natural gas prices.”
EIA is forecasting a Henry Hub spot price averaging $4.58 per million Btu from December through February 2022, with the price generally declining through 2022 for an average of $3.98 per million Btu “amid rising U.S. natural gas production and slowing growth in LNG exports.”
U.S. LNG exports are estimated at an average of 10.7 billion cubic feet per day in November, an increase of 0.8 bcf from October, “supported by large price differences between the Henry Hub price in the United States and spot prices in Europe and Asia,” the agency said.
LNG exports are forecast to average 9.8 bcf per day this year, up 50% from 2020, and are expected to average 11.1 bcf per day from December through March, with high levels of LNG exports expected to continue into 2022, averaging 11.5 bcf per day for 2022, up 17% from 2021, reflecting an assumption that global natural gas demand remains high and there is an increase in U.S. LNG export capacity.
EIA said the November U.S. export average of 10.7 bcf per day is some 104% of LNG export nameplate capacity, with LNG exports forecast to increase “between December 2021 and late 2022 as a result of the optimization of operations at Cheniere’s Sabine Pass and Corpus Christi terminals; the completion of Train 6 at Sabine Pass LNG, which started producing LNG in November; and the completion of a new LNG terminal at Calcasieu Pass, Louisiana.”
The agency said if LNG exports average 11.1 bcf per day from December through February, as it has forecast, with exports above 11 bcf per day each month, December would be the first month on record with LNG exports from the U.S. of more than 11 bcf per day.
U.S. dry natural gas production averaged 96.1 bcf per day in November, up 1 bcf from October and EIA said it is forecasting production to average 95.3 bcf per day for the rest of the winter and to average 96 bcf per day in 2022, “driven by natural gas and crude oil price levels that we expect will be sufficient to support enough drilling to sustain production growth.”
Global consumption The agency estimates global consumption in November of 99.7 million bpd of petroleum and liquid fuels, up 4.9 million bpd from November 2020 but 1.1 million bpd less than November 2019. Global consumption is estimated to average 96.9 million bpd for all of 2021, up 5.1 million bpd from 2020. For 2022, consumption is project to increase by 3.5 million bpd, to an average of 100.5 million bpd.
EIA said it estimated that global crude oil consumption exceeded production for five consecutive quarters beginning in the third quarter of 2020, resulting in global stock withdrawals averaging 1.7 million bpd, contributing to consistent increases in crude oil prices.
Stock draws are forecast to slow to 0.9 million bpd in the fourth quarter of this year and are expected to continue to fall, limiting upward price pressure. The agency said it is forecasting global oil stocks to rise by an average 0.5 million bpd beginning in the second quarter, “as production begins to increase faster than global demand,” contributing to downward pressure on crude oil prices, with Brent forecast to drop to $67 per barrel in the fourth quarter.
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