· Olusola Bell
· olusol
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· The May Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty because responses to COVID-19 continue to evolve.
· According to the United States Energy Information Administration (EIA),economic activity has increased significantly after reaching multiyear lows in the second quarter of 2020.
· The increase in economic activity and easing of COVID-19-related restrictions have contributed to rising energy use.
· U.S. gross domestic product (GDP) declined by 3.5% in 2020 from 2019 levels. This STEO assumes U.S. GDP will grow by 6.2% in 2021 and by 4.3% in 2022. The U.S. macroeconomic assumptions in this outlook are based on forecasts by IHS Markit. “Our forecast assumes continuing economic growth and increasing mobility with easing COVID-19-related restrictions, and any developments that would cause deviations from these assumptions would likely cause energy consumption and prices to deviate from our forecast”
Bb Brent crude oil spot prices averaged $65 per barrel (b) in April, unchanged from the average in March. Brent prices were steady in April as market participants considered diverging trends in global COVID-19 cases. In some regions, notably the United States, oil demand is rising as both COVID-19 vaccination rates and economic activity increase. In other regions, notably India, oil demand is declining because of a sharp rise in COVID-19 cases. EIA forecasts that Brent prices will average $65/b in the second quarter of 2021, $61/b during the second half of 2021, and $61/b in 2022.
“We estimate that the world consumed 96.2 million barrels per day (b/d) of petroleum and liquid fuels in April, an increase of 15.8 million b/d from April 2020 but 4.0 million b/d less than April 2019 levels. We forecast that global consumption of petroleum and liquid fuels will average 97.7 million b/d for all of 2021, which is a 5.4 million b/d increase from 2020. We forecast that consumption of petroleum and liquid fuels will increase by 3.7 million b/d in 2022 to average 101.4 million b/d”.
We expect that gasoline consumption in the United States will average almost 9.0 million b/d this summer (April–September), which is 1.2 million b/d more than last summer but almost 0.6 million b/d less than summer 2019. We increased our summer gasoline consumption forecast by 0.1 million b/d from last month based on weekly data that suggested more gasoline consumption than we had previously forecast.
The increase also reflects IHS Markit’s increased employment forecast. For all of 2021, we forecast that U.S. gasoline consumption will average 8.7 million b/d, which is up from 2020 (8.0 million b/d) but down from 2019 (9.3 million b/d)
“According to our most recent data, U.S. crude oil production averaged 9.9 million b/d in February 2021, which was down by 1.2 million b/d from January.
In February, cold temperatures caused significant declines in crude oil production in Texas, as well as smaller declines in other states.
We estimate that production outages were generally limited to February and that U.S. crude oil production rose to 10.9 million b/d in March and to almost 11.0 million b/d in April.
Because the average price of West Texas Intermediate crude oil remains above $55/b in our forecast, we expect producers will drill and complete enough wells in the coming months to offset declines at existing wells. In addition, new projects in the Federal Offshore Gulf of Mexico contribute to rising production in the forecast. U.S. crude oil production in the forecast averages 11.3 million b/d in the fourth quarter of 2021 and then rises to average 11.8 million b/d in 2022.
Gas
In April, the natural gas spot price at Henry Hub averaged $2.66 per million British thermal units (MMBtu), which is slightly higher than the March averageof $2.62/MMBtu.
“We expect the Henry Hub spot price will average $2.78/MMBtu in the second quarter of 2021 and will average $3.05/MMBtu for all of 2021, which is up from the 2020 average of $2.03/MMBtu.
We expect natural gas prices will rise this year, primarily as a result of two factors: growth in liquefied natural gas (LNG) exports and rising domestic natural gas consumption in the residential, commercial, and industrial sectors”.
“In 2022, we expect the Henry Hub price will fall to an average $3.02/MMBtu amid slowing growth in LNG exports and rising production”.