American Oil and Gas Reporter - March 2020 - 98

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EIA Drops Petroleum Demand Forecast
WASHINGTON-Largely as a result of
the coronavirus, the U.S. Energy Information
Administration is lowering its estimate of
global petroleum demand this year as well
as its projection for crude oil prices.
In its Short-Term Energy Outlook released Feb. 11, EIA says it now expects
global petroleum and liquid fuels demand
will average 100.3 million barrels a day
in the first quarter of 2020. This is 900,000
barrels a day less than the agency forecast
in its January STEO, and reflects both
the effects of the coronavirus and warmerthan-normal January temperatures across
much of the Northern Hemisphere.
While it acknowledges that the magnitude and duration of the coronavirus's
effects are highly uncertain, EIA nevertheless has reduced its estimates for Chinese liquid fuels consumption by 400,000
bbl/d, saying it now expects Chinese consumption to average 14.8 MMbbl/d from
February through April, while travel restrictions are in effect.
The February STEO projects global
petroleum and liquid fuels demand will
rise by 1.0 MMbbl/d this year, down from
the 1.3 MMbbl/d increase forecast in the
January STEO. EIA is projecting global
demand will grow 1.5 MMbbl/d in 2021.
EIA says it expects some of the effects
of lower oil consumption in the first half
of this year to be offset by reduced production from the Organization of Petroleum Exporting Countries, which it expects
to reduce its crude oil production by
500,000 bbl/d from March through May.
This reduction is in addition to the cuts
announced at OPEC's December meeting,
EIA emphasizes.
EIA now forecasts OPEC crude oil production will average 28.9 MMbbl/d this
year, which is 300,000 bbl/d less than forecast in its January STEO. In general, EIA
says, it assumes OPEC will limit production
through all of 2020 and 2021 to target relatively balanced global oil markets.
Global liquid fuels inventories fell by
roughly 100,000 bbl/d last year, the agency
notes, adding that it expects they will
grow by 200,000 bbl/d this year.
"Inventories will build by 600,000 bbl/d
in the first half of the year because of
slow oil demand growth and strong nonOPEC oil supply growth. Firmer demand
growth as the global economy strengthens
and slower supply growth later in the year
contribute to forecast inventory draws of
100,000 bbl/d in the second half of 2020,"
EIA delineates, saying it expects global
liquid fuels inventories will decline by
200,000 bbl/d in 2021.
98 THE AMERICAN OIL & GAS REPORTER

U.S. Production And Prices
EIA forecasts U.S. crude oil production
will average 13.2 MMbbl/d this year, up
1.0 MMbbl/d from 2019, and then rise to
13.6 MMbbl/d in 2021. "Most of the
production growth in the forecast occurs
in the Permian region of Texas and New
Mexico," the agency specifies.
Brent crude oil spot prices averaged
$64 a barrel in January, the agency observes, down $4 a barrel from December.
"Brent prices fell steadily through January
and into the first week of February, closing
at less than $54 a barrel on Feb. 4, the
lowest price since December 2018, reflecting market concerns about oil demand," EIA comments.
The February STEO forecasts Brent
crude oil will average $58 a barrel in the
first half of this year before rising to an
average of $64 a barrel during the final
six months of the year. Brent crude prices
are forecast to average $61 a barrel for
all of 2020, a decrease of $4 a barrel
from the January STEO.
West Texas Intermediate prices are
projected to average $53 a barrel in the
first quarter before slipping to $52 in the
second quarter, but are projected to rebound $58 a barrel in the second quarter
and $60 in the fourth quarter for an
annual average of $56, EIA adds.
Natural Gas
Henry Hub natural gas spot prices averaged $2.02 an MMBtu in January as
warm weather contributed to below-average inventory withdrawals, EIA reports.
The agency estimates U.S. heating degree
days were 18% lower than the 10-year
average during January.
On Feb. 6, EIA continues, the Henry
Hub spot price fell to $1.86 an MMBtu,
and the agency says it expects prices will
remain below $2.00 through March before
rising in the second quarter as production

declines and natural gas use for power
generation increases demand.
The February STEO predicts Henry
Hub spot prices will average $2.36 an
MMBtu in the third quarter of 2020 and
$2.21 for all of 2020. EIA says it expects
natural gas prices then will increase in
2021 to an annual average of $2.53 an
MMBtu.
U.S. dry natural gas production averaged a record 92.1 billion cubic feet a
day in 2019, the agency goes on. Although
the February STEO forecasts dry natural
gas production will average 94.2 Bcf/d
for all of 2020-a 2% increase from 2019-
EIA says it expects monthly production
to generally decline through the year,
falling from an estimated 95.4 Bcf/d in
January to 92.5 Bcf/d in December.
"The falling production occurs mostly
in the Appalachian and Permian regions,"
EIA details. "In the Appalachia region,
low natural gas prices are discouraging
natural gas-directed drilling. In the Permian,
low oil prices are expected to reduce associated gas output from oil wells."
Next year, EIA forecasts, dry natural
gas production will stabilize near December 2020 levels at an annual average
of 92.6 Bcf/d, a 2% decline from this
year, which the agency notes would be
the first decline in annual average natural
gas production since 2016.
According to EIA estimates, U.S.
working natural gas inventories ended
January at more than 2.6 trillion cubic
feet, 9% higher than the five-year average.
It forecasts total working inventories will
end March at almost 2.0 Tcf, 14% higher
than the five-year average. In the forecast,
inventories rise by 2.1 Tcf during the
April-October injection season to reach
almost 4.1 Tcf on Oct. 31, which EIA
says would be the highest end-of-October
inventory level on record.
❒

Oil, Gas Operators Detect Value
In Developing Drone Technology
NEW YORK-Oil and gas operators
are collaborating with drone manufacturers
to develop customizable applications
using sensing and imaging technologies
that can provide real-time insights, GlobalData says.
In its report, "Drones in Oil & Gas-
Thematic Research," the company describes how unmanned aerial vehicles

(UAVs) have become integral to inspections and predictive maintenance of critical
oil and gas infrastructure thanks to advancements in drone technology. Falling
hardware costs, easing government regulations and increased digital transformation using sensors, cloud computing
and the Internet of Things also are easing
the transition, the report notes.

American Oil and Gas Reporter - March 2020

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