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EIA oil price forecast up $5 per barrel
US drilling activity expected to increase based on higher prices, with production expected to average 13.4 million bpd next year Kristen Nelson Petroleum News
The Brent crude oil spot price averaged $71 per barrel in April, the U.S. Energy Information Administration said May 7, an increase of $5 from March and just below the April 2018 price, and the agency has increased its forecast for the annual average for both this year and next.
“In the May Short-Term Energy Outlook, EIA increased its forecast for average Brent spot prices in 2019 and 2020 by about $5 per barrel,” EIA Administrator Dr. Linda Capuano said in a statement on the May STEO release. “The increase accounts for near-term tightness in oil markets and increasing supply disruption risks in several oil-producing companies.”
EIA is now forecasting an average of $70 per barrel this year and $67 in 2020, both about $5 per barrel higher than the April forecast, attributed to both increasing supply disruption and tighter expected global oil market balances.
The 2018 Brent average was $71 per barrel.
April saw the fourth consecutive monthly increase in crude prices, which were approaching six-month highs near the end of the month, EIA said. Supply risk was heightened April 22, when the U.S. notified eight countries which had sanction waivers to import Iranian crude and condensate that those waivers would not be extended past their May 2 expiration.
EIA said it expects increased production from Saudi Arabia, the United Arab Emirates, Kuwait and Russia “to largely backfill the lower Iranian production, though these countries will likely wait until their June meeting to make any decisions regarding production increases.”
Higher prices also reflect increased geopolitical risk, the agency said, noting that unrest within Venezuela “contributes to a highly uncertain situation that could immediately disrupt the remaining oil production there.” Even if there are no additional disruptions in Venezuela, EIA said it forecasts that country’s production will continue to see significant declines through 2020.
Growing US, OPEC production “EIA expects some tightness in global oil markets during the second and third quarters of 2019, but anticipates that growing production in the United States and key OPEC countries will ensure that global supplies continue to meet demand moving forward,” Capuano said.
The agency said recent oil price increases and expected higher prices through 2020 are expected to contribute to increased drilling in the U.S., with the expected U.S. crude oil production forecast up 300,000 bpd from April and expected to average 13.4 million bpd in 2020. EIA said the higher 2020 production “is the result of higher forecast prices in 2019 that have a lagged effect on production.”
Crude oil production in the Organization of the Petroleum Exporting Countries is expected to average 30.3 million bpd this year, down 1.7 million bpd from 2018. EIA said it expects OPEC production to fall by 400,000 bpd to an average of 29.8 million bpd in 2020, with Venezuela and Iran accounting for most of the OPEC output declines, which EIA expects to be partially offset by other OPEC members.
Global oil demand is expected to outpace supply this year, but in 2020, global liquid fuels supply is forecast to rise 1.9 million bpd, with 1.5 million bpd coming from the U.S.
Natural gas “EIA continues to forecast that U.S. dry natural gas production will reach new records in 2019 and 2020. The forecast indicates that this year will mark the first time U.S. production will exceed an average of 90 billion cubic feet per day,” Capuano said.
The Henry Hub natural gas spot price averaged $2.64 per million British thermal units in April, EIA said, down 31 cents from March, with prices falling due to warmer-than-normal temperatures across much of the U.S.
Strong growth in U.S. natural gas production is expected to put downward pressure on prices in 2019 and 2020, the agency said, with Henry Hub spot prices expected to average $2.79 per million Btu this year, down 36 cents from 2018, and to average $2.78 in 2020.
The forecast of 90.3 billion cubic feet per day this year would be an increase of 6.9 bcf from 2018, with production expected to grow to an average of 92.2 bcf per day in 2020.
EIA said April 2019 was the second-warmest April in 23 years and it estimates that the relatively warm temperatures, “combined with ongoing increases in natural gas production, contributed to the largest injection of natural gas into U.S. working storage in April based on historical data going back to 1976.”
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