Voluntary shut-ins earlier this year were more than expected, says the Energy Information Administration (EIA). In its monthly Short-Term Energy Outlook, the EIA lowered its crude forecast for the entire year.
The EIA now expects U.S. crude production to average 11.3 MMBbl/d in 2020, a downward revision of 370 MBbl/d from the July STEO report. Production is expected to fall even lower in 2021, to 11.1 MMBbl/d. Instead of falling fast then stabilizing as it did in 2020, next year’s production would be low and flat due to suppressed oil prices.
Demand numbers from the same report showed ongoing weakness, too. The EIA estimates that U.S. liquid fuels consumption averaged 16.2 MMBbl/d in the second quarter of 2020, down 4.1 MMBbl/d from the same period in 2019. The decline was attributed to travel restrictions and reduced economic activity related to COVID-19 containment efforts. The agency forecasts U.S. oil consumption to rise through the end of 2021 to 20.0 MMBbl/d.
High petroleum stock withdrawal rates will put upward pressure on crude prices through the end of 2020, concludes the EIA. Still, high inventory levels are expected to mitigate any significant increases in supply.
Similarly, global inventory withdrawals through the end of 2021 will put upward pressure on crude oil prices, which will average $50/Bbl for Brent in 2021, according to the EIA.
EIA expects production to rise through next year. Global supply is expected to decline to 90.4 MMBbl/d in the third quarter of 2020 before rising to an annual average of 99.4 MMBbl/d in 2021.
Global demand slowly returns, although EIA expects faster recovery than some other prominent forecasters. The EIA estimates that consumption of petroleum and liquid fuels globally will average 93.1 MMBbl/d for in 2020, down 8.1 MMBbl/d from 2019 (which was at 101.2). However, the agency expects a sharp rebound in 2021 by 7 MMBbl/d to 100.1 MMBbl/d. Therefore, demand next year would still lag 2019’s level by 1.1 MMBbl/d.