Global liquid fuels

• The September Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty because mitigation and reopening efforts related to the 2019 novel coronavirus disease (COVID-19) continue to evolve. Reduced economic activity related to the COVID-19 pandemic has caused changes in energy demand and supply patterns in 2020. This STEO assumes U.S. gross domestic product declined by 4.6% in the first half of 2020 from the same period a year ago and will rise beginning in the third quarter of 2020, with year-over-year growth of 3.1% in 2021. The U.S. macroeconomic assumptions in this outlook are based on forecasts by IHS Markit.

• Brent crude oil spot prices averaged $45 per barrel (b) in August, up $2/b from the average in July. Brent prices in August were up $26/b from the multiyear low monthly average price in April. The increase in oil prices has occurred as EIA estimates global oil markets have shifted from global liquid fuels inventories building at a rate of 7.2 million barrels per day (b/d) in the second quarter to drawing at a rate of 3.7 million b/d in the third quarter. EIA expects inventory draws in the fourth quarter of 3.1 million b/d before markets become relatively balanced in 2021, with forecast draws of 0.3 million b/d. Despite expected inventory draws in the coming months, EIA expects high inventory levels and surplus crude oil production capacity will limit upward pressure on oil prices. EIA forecasts monthly Brent spot prices will average $44/b during the fourth quarter of 2020 and rise to an average of $49/b in 2021 as oil markets become more balanced.

• EIA estimates that global consumption of petroleum and liquid fuels averaged 94.3 million b/d in August. Liquid fuels consumption was down 8.2 million b/d from August 2019, but it was up from an average of 85.1 million b/d during the second quarter of 2020 and 93.3 million b/d in July. EIA forecasts that consumption of petroleum and liquid fuels globally will average 93.1 million b/d for all of 2020, down 8.3 million b/d from 2019, before increasing by 6.5 million b/d in 2021. EIA’s forecast for growth in 2021 is 0.5 million b/d less than in the August STEO. The downward revision is largely a result of lower expected consumption growth in China, which EIA now forecasts to grow by 1.0 million b/d in 2021.

• EIA estimates that global liquid fuels production averaged 91.5 million b/d in August, down 9.7 million b/d year over year. The decline largely reflects voluntary production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+), along with reductions in drilling activity and production curtailments in the United States because of low oil prices. EIA expects global liquid fuels production will rise to an annual average of 99.3 million b/d in 2021.

• Crude oil production in the United States has risen in recent months after declining from 12.7 million b/d in the first quarter of 2020 to a recent low of 10.0 million b/d in May. EIA estimates U.S. crude oil production increased to 10.8 million b/d in August. Production has risen as tight oil operators have brought wells back online in response to rising prices after curtailing production amid low oil prices in the second quarter. The increase in total U.S. production occurred despite shut-in production in the Gulf of Mexico as a result of Hurricane Laura. EIA expects production to rise to 11.2 million b/d in September as production in the Gulf of Mexico returns. However, after September, EIA expects U.S. crude oil production to decline slightly, averaging just under 11.0 million b/d during the first half of 2021 because EIA expects that new drilling activity will not generate enough production to offset declines from existing wells. EIA expects drilling activity to rise later in 2021, contributing to U.S. crude oil production reaching an average of 11.3 million b/d in the fourth quarter of 2021. On an annual average basis, EIA expects U.S. crude oil production to fall from an average of 12.2 million b/d in 2019 to 11.4 million b/d in 2020 and 11.1 million b/d in 2021.