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Short-Term Energy Outlook

Release Date: January 14, 2020  |  Next Release Date: February 11, 2020  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Global liquid fuels

EIA estimates that global oil markets were roughly balanced in 2019, as global oil supply declined slightly and global oil consumption grew at its slowest pace since 2011. Both supply and consumption grow in 2020 in this forecast. EIA expects global oil supply will rise by 1.6 million barrels per day (b/d) in 2020 and global oil consumption will rise by 1.3 million b/d, contributing to global oil inventories rising at a pace of 0.3 million b/d. Supply growth in 2020 is led by countries that are not members of the Organization of the Petroleum Exporting Countries (OPEC), particularly the United States, Norway, Brazil, and Canada. EIA expects non-OPEC producers will increase oil supply by 2.6 million b/d in 2020, which will more than offset forecast supply declines of 1.0 million b/d from OPEC members.

In the first half of 2020, EIA expects global oil inventory builds of 0.5 million b/d will contribute to Brent spot prices falling to an average of $62 per barrel (b) by May from an average of $67/b in January. The relatively weak market balances EIA is forecasting for the first six months of 2020 occur amid market concerns about potential supply disruptions. However, a forecast of inventory growth and OPEC spare capacity of more than 2.0 million b/d could help reduce upward price pressure in the case of a limited disruption to oil supply or transportation. For all of 2020, EIA forecasts that global oil inventories will build by 0.3 million b/d and Brent prices will average $65/b.

Oil balances in EIA’s forecast begin to tighten in mid-2020, and in 2021, global oil supply growth slows. Non-OPEC supply growth slows to 0.9 million b/d in 2021, driven by a decelerating pace of growth in U.S. tight oil. EIA expects OPEC supply to add another 0.1 million b/d of growth, bringing total forecast global supply growth for 2021 to 1.0 million b/d. EIA forecasts global oil consumption growth will average 1.4 million b/d in 2021, and with consumption growth outpacing supply growth, EIA expects inventories to draw by 0.2 million b/d. These draws contribute to EIA’s forecast that Brent prices will rise to an average of $68/b in 2021.

World liquid fuels production and consumption balance

Global Petroleum and Other Liquid Fuels Consumption. Preliminary data and estimates indicate that global liquid fuels consumption grew by 0.8 million b/d in 2019. EIA forecasts that consumption will rise by 1.3 million b/d in 2020 and by 1.4 million b/d 2021. The expected rise in consumption growth from 2019 results from a forecast of rising global gross domestic product (GDP). Based on forecasts from Oxford Economics, EIA assumes global oil-weighted GDP growth will rise from 1.9% in 2019 to 2.4% in 2020 and 3.0% in 2021.

EIA expects that global liquid fuels consumption will also rise in 2020 because of newly completed petrochemical plants in China, the United States, and Russia that use liquefied petroleum gases (LPG) as feedstock. Additionally, EIA forecasts that demand will further grow further as a result of the new International Maritime Organization (IMO) rules on sulfur content of fuel used by ocean-going vessels. EIA assumes that the switch from residual fuel to less energy-dense marine distillate will likely result in an increase in total liquid fuels consumption of about 0.1 million b/d. This increase in total consumption is the result of ships using less energy-dense fuel that requires some increase in volume to serve the same level of shipping traffic. Absent the increase in LPG consumption and IMO 2020, EIA’s forecast for liquid fuels consumption growth would be lower in 2020.

World liquid fuels consumption growth

Countries that are not part of the Organization for Economic Cooperation and Development (OECD) continue to drive demand growth in the forecast. Non-OECD liquid fuels consumption growth accounts for 1.2 million b/d of the forecast global growth in both 2020 and 2021; China and India represent about half of all global growth in the forecast.

EIA forecasts that China’s consumption will increase by 0.5 million b/d in both 2020 and 2021. EIA does not expect growth in China’s oil consumption to slow as much as slowing GDP growth would imply because a number of new petrochemical plants add more than 0.2 million b/d of consumption in 2020 and almost 0.1 million b/d in 2021. EIA also forecasts that liquid fuels consumption in India will grow by about 0.2 million b/d in both 2020 and 2021, driven by rising gasoline, jet fuel, and hydrocarbon gas liquids consumption.

World liquid fuels consumption

OECD petroleum and other liquid fuels consumption in the forecast grows by 0.1 million b/d in both 2020 and 2021. The United States is the main contributor to this growth. EIA forecasts that Europe’s liquid fuels consumption will decline slightly in 2020 and then remain flat in 2021. Japan is expected to see liquid fuels consumption continue to decline in both years.

Non‐OPEC Petroleum and Other Liquid Fuels Supply. EIA estimates that non-OPEC petroleum and other liquid fuels supply increased by 2.0 million b/d in 2019. Production growth of 1.6 million b/d in the United States accounted for more than 80% of the 2019 supply growth, and Brazil, Canada, Russia, and China collectively added an additional 0.6 million b/d. EIA expects non-OPEC petroleum and other liquid fuels production will rise by 2.6 million b/d in 2020 and by 0.9 million b/d in 2021. Forecast growth in the United States contributes 1.7 million b/d and 0.6 million b/d, respectively, in each year. Brazil provides another 0.3 million b/d in 2020 and 0.2 million b/d in 2021. Norway contributes 0.4 million b/d of growth in 2020, and then its production growth slows to less than 0.1 million b/d in 2021.

EIA expects Canada’s total liquid fuels production will increase by almost 0.2 million b/d in 2020 and 2021. Canada’s production growth will accelerate compared with 2019 as the Alberta Government’s production curtailments are reduced and more rail takeaway capacity gives producers an outlet for supplies. However, EIA still expects lower production growth in Canada than experienced during most of the past decade. EIA does not expect any additional production from new oil sands projects to come online during the forecast, and production growth stems from expansions of existing projects.

EIA expects Brazil’s total liquid fuels production will grow by more than 0.3 million b/d in 2020 and by 0.2 million b/d in 2021. After a number of delays, the seven floating production, storage, and offloading vessels (FPSOs) that came online in 2018 and 2019 are now producing at maximum or near-maximum capacity. The main driver of growth will continue to be at least four more new FPSOs through 2023. EIA believes the Santos Basin, particularly the Lula and Buzios fields, will produce enough crude oil in the next two years to offset declines in Brazil’s more mature onshore and offshore areas.

In Norway, Phase 1 of the Johan Sverdrup field came online in October 2019, and it will drive most of the production growth in Norway in 2020 and 2021. At its peak, Phase 1 will produce 0.4 million b/d.

EIA currently forecasts that Russia’s production levels in 2020 and 2021 will be similar to production in 2019 because EIA assumes that the agreement between Russia and OPEC to restrain production will continue throughout the forecast period.

EIA forecasts the largest declines among non-OPEC producers will be in Mexico, though Mexico’s production declines slow from 0.2 million b/d in 2019 to less than 0.1 million b/d in 2020 and 2021.

World liquid fuels production and annual change

OPEC Petroleum and Other Liquid Fuels Supply. On December 6, 2019, OPEC and a group of other oil producers announced they were deepening the production cuts originally announced in December 2018. The group is now targeting production that is 1.7 b/d lower than in October 2018, compared with the former target reduction of 1.2 million b/d. OPEC announced that the cuts would remain in effect through the end of March 2020. However, EIA assumes that OPEC will limit production through all of 2020 and 2021 to target relatively balanced global oil markets. As a result of production restraint from most OPEC members and continuing production declines in Iran and Venezuela, EIA expects OPEC production will fall in 2020. EIA forecasts that OPEC crude oil production will average 29.2 million b/d in 2020, down 0.6 million b/d from 2019. In 2021, forecast OPEC crude oil production increases by 0.1 million b/d.

EIA estimates that Venezuela’s crude oil production for 2019 averaged 0.8 million b/d. EIA expects Venezuela’s production will continue recent trends and fall through the forecast period—albeit at a slower overall rate of decline—while the financial situation of the state-owned Petróleos de Venezuela (PdVSA) remains extremely precarious. Venezuela, which relies heavily on oil revenues, has seen its cash income severely constricted because only about half of its crude oil exports generate cash revenues. The rest is used for in-kind loan payments to China, which become less valuable with lower global oil prices. Venezuela’s oil revenue is also reduced by ongoing payments to ConocoPhillips following an arbitration agreement about its seized assets and to holders of PdVSA’s 2020 bonds.

In OPEC Africa, EIA expects Nigeria’s production growth to slow considerably through 2021 following production gains from the Egina field, which was commissioned in early 2019. Nigeria’s production growth slows reflecting a lack of investment in exploration and development of new fields and declining production from its older fields. Angola’s production declined in 2019 as a result of technical issues at existing fields and underinvestment in field exploration and development. Several marginal expansions of existing fields will offset some of the declines from Angola’s mature fields through 2021, resulting in production that will remain roughly unchanged. Libya’s production increased in 2019 as a result of the restart and development of new or previously shut-in wells. Libya’s 2019 production level was the highest since 2012 and remained relatively stable throughout the year despite the ongoing civil war and some minor field disruptions. However, supply disruptions will remain a significant risk through 2021 because of the tenuous security situation in the country and because of infrastructure that needs upgrades for continued operability.

EIA expects that crude oil production in the Neutral Zone shared between Saudi Arabia and Kuwait, which has been offline since 2014, will begin to return to the market in the second half of 2020 and increase to full production levels in 2021. However, EIA assumes that when the Neutral Zone fields start producing, production at other fields will be reduced, and overall OPEC production will be unaffected.

EIA estimates that OPEC non-crude oil liquids production averaged 5.4 million b/d in 2019. EIA forecasts that it will fall to 5.0 million b/d in 2021 and remain flat in 2021. The decrease in non-crude oil liquids production next year is the result of lower expected condensate output in Iran.

EIA expects that OPEC surplus crude oil production capacity, which averaged 2.0 million b/d in 2019, will increase to 2.4 million b/d in 2020 and then to 2.5 million b/d in 2021. This estimate does not include additional capacity that may be available in Iran but is offline because of U.S. sanctions on Iran’s oil sales.

OPEC surplus crude oil production capacity

OECD Petroleum Inventories. EIA estimates that OECD commercial crude oil and other liquid fuels inventories were 2.91 billion barrels at the end of 2019, equivalent to about 62 days of consumption. EIA expects OECD inventories rise to 2.95 billion barrels at the end of 2020, staying at about the same level at the end of 2021.

OECD commercial stocks of crude oil and other liquids (days of supply)

Crude Oil Prices. The spot price of Brent crude oil averaged $67/b in December 2019, up $4/b from the average in November and $10/b higher than in December 2018. Price increases in December partly reflect market expectations that global economic conditions in 2020 will be better than previously anticipated, and the announced first phase of a trade deal between the United States and China to be signed in January. Also putting upward pressure on prices, on December 6, 2019, OPEC and partner countries agreed to deepen production cuts through March 2020. More recently, on January 3, events in Iraq increased uncertainty around potential disruptions to oil production and shipping in the Middle East, adding volatility and an additional risk premium to global oil prices in the short term.

EIA estimates that global liquid fuels inventories fell by less than 0.1 million b/d in 2019, an indication that markets were relatively balanced. EIA expects global oil markets will experience builds in 2020, with forecast inventories rising at a rate of 0.3 million b/d. The combination of continuing crude oil production restraint on the part of OPEC and accelerating global demand growth is expected to be more than offset by growth in non-OPEC production, largely in the United States, Norway, Brazil, and Canada. However, in 2021, EIA expects oil markets will experience inventory draws, as non-OPEC production growth slows, led by decelerating growth in the United States. EIA assumes that OPEC will continue to try to adjust production levels to target relative balance in global oil markets. Based on a forecast of slowing oil supply growth and mostly stable oil demand growth, EIA expects global oil inventories will fall by almost 0.2 million b/d in 2021.

Given the expectation of inventory builds in 2020 and draws in 2021, EIA forecasts Brent prices will average $65/b in 2020 and $68/b in 2021. In the first half of 2020, EIA expects global oil prices to be affected by both the downward price pressures of relatively weak oil market balances and by the upward price pressures of geopolitical risk. This forecast assumes that Brent crude oil prices will decline in early 2020, falling from a January average of $67/b to an average of $62/b in May 2020, as risk premiums slowly fade. EIA does not forecast supply disruptions, and any physical supply disruptions would likely cause prices to be higher than this forecast. Beginning in mid-2020 and into 2021, EIA expects that tightening market fundamentals will be the main driver of upward price pressures, with forecast Brent prices increasing to $69/b at the end of 2021 and averaging $68/b for the year.

Global economic developments and geopolitical events in the coming months could push oil prices higher or lower than the current STEO price forecast. Uncertainty remains regarding the duration of, and adherence to, the current OPEC production cuts. Geopolitical-related disruption risks are always present in the oil market, and—as the attacks on Saudi Arabia’s oil infrastructure in September 2019demonstrate—can bring significant volumes of both current production and spare capacity off the market suddenly. Developments regarding the rate of economic growth and its effect on global oil demand growth further contribute to price uncertainty. Also, although EIA expects that crude oil price impacts from IMO regulations that started in 2020 will be limited, how the global refining and shipping industries will respond and how the actual outcomes of these decisions will affect crude oil prices remain unknown. Finally, the U.S. tight oil sector continues to be dynamic, and quickly evolving trends in this sector could affect both current crude oil prices and expectations for future prices.

EIA forecasts average West Texas Intermediate (WTI) crude oil prices average about $5.50/b lower than Brent prices in both 2020 and 2021. This price discount is based on the assumption of continued sufficient pipeline capacityfrom production areas in West Texas and from Cushing, Oklahoma, to refineries and export terminals along the U.S. Gulf Coast. Given recent growth in U.S. crude oil production, volumes in excess of Gulf Coast refinery demand are exported, and WTI prices are set by competition with Brent into the marginal export markets in Asia. EIA’s forecast of a $5.50/b price spread between WTI and Brent reflects the additional costs incurred in bringing volumes from Cushing to Asia compared with the costs of shipping from the North Sea to Asia.

The current values of futures and options contracts suggest significant uncertainty in the oil price outlook. WTI futures contracts for April 2020 delivery that were traded during the five-day period ending January 9 averaged $61/b, and implied volatility averaged 28%. These levels established the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in April 2020 at $48/b and $78/b, respectively. The 95% confidence interval for market expectations widens over time; the lower and upper limits for prices in December 2020 are $36/b and $91/b, respectively.

West Texas Intermediate (WTI) crude oil price

Global Petroleum and Other Liquids
aWeighted by oil consumption.
bForeign currency per U.S. dollar.
Supply & Consumption (million barrels per day)
Non-OPEC Production 63.5565.5468.1369.01
OPEC Production 37.3235.2134.2434.33
OPEC Crude Oil Portion 31.9629.7929.1929.28
Total World Production 100.86100.75102.37103.34
OECD Commercial Inventory (end-of-year) 2,8602,9142,9512,945
Total OPEC surplus crude oil production capacity 1.491.982.442.49
OECD Consumption 47.6247.4247.5647.69
Non-OECD Consumption 52.3353.3554.5655.80
Total World Consumption 99.95100.77102.11103.49
Primary Assumptions (percent change from prior year)
World Real Gross Domestic Producta
Real U.S. Dollar Exchange Rateb 0.32.2-0.1-1.2

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Related Figures
West Texas Intermediate (WTI) crude oil price XLSX PNG
World liquid fuels production and consumption balance XLSX PNG
Estimated unplanned crude oil production outages among OPEC and non-OPEC producers XLSX PNG
World liquid fuels consumption XLSX PNG
World liquid fuels consumption growth XLSX PNG
World crude oil and liquid fuels production XLSX PNG
World liquid fuels production and consumption XLSX PNG
OPEC surplus crude oil production capacity XLSX PNG
OECD commercial stocks of crude oil and other liquids (days of supply) XLSX PNG
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