U.S. Liquid Fuels

• The October Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty because mitigation and reopening efforts related to 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 and will continue to affect these patterns in the future. This STEO assumes U.S. gross domestic product (GDP) declined by 4.4% in the first half of 2020 from the same period a year ago. It assumes that GDP will rise beginning in the third quarter of 2020, and will grow 3.5% year-over-year in 2021. The U.S. macroeconomic assumptions in this outlook are based on forecasts by IHS Markit.

• EIA reported that U.S. crude oil production averaged 11.0 million b/d in July (the most recent month for which historical data are available), up 0.5 million b/d from June. In May, U.S. crude oil production reached a two-and-a-half-year low of 10.0 million b/d, resulting from curtailed production amid low oil prices. Since then, U.S. production has increased mainly because tight oil operators have brought wells back online in response to rising prices. EIA estimates that production rose to 11.2 million b/d in September. However, EIA expects U.S. crude oil production to generally decline to average of 11.0 million b/d in the second quarter of 2021 because 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 returning to 11.2 million b/d in the fourth quarter of 2021. On an annual average basis, EIA expects U.S. crude oil production to fall from 12.2 million b/d in 2019 to 11.5 million b/d in 2020 and 11.1 million b/d in 2021.