NrgEdge Editor

Sharing content and articles for users
Last Updated: October 14, 2019
1 view
Business Trends
image

In the October 2019 Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) forecasts lower crude oil prices in the fourth quarter of 2019 and in 2020 despite tighter global balances. The tighter balances are largely the result of unprecedented short-lived loss of global supply following the September 14 attacks on crude oil production and processing infrastructure in Saudi Arabia. The production declines contribute to overall stock draws in the second half of 2019 with a relatively large stock draw in the third quarter. In the fourth quarter, however, EIA forecasts global supply growth will outpace global demand growth, resulting in an inventory build, offsetting some of the third quarter draws (Figure 1). EIA lowered its crude oil price forecast for the fourth quarter of 2019 by $1 per barrel (b) to $59/b, reflecting current price trends, and lowered its crude oil price forecast for 2020 by $2/b to average $60/b because of expected supply growth.

Figure 1. World liquid fuels production and consumption balance

In the October STEO, EIA forecasts total global petroleum stocks in the second half of 2019 will decrease by an average of 290,000 barrels per day (b/d), compared with the September STEO forecast stock build of 250,000 b/d for the same period. EIA forecasts total world crude oil and other liquids production for the second half of 2019 to average 101.3 million b/d, down by 550,000 b/d from the September STEO. Most of the production decline is the result of lower output from Saudi Arabia, reducing the collective output of the Organization of the Petroleum Exporting Countries (OPEC) to 34.8 million b/d for the second half of 2019.

In the October STEO, EIA assumed the Abqaiq facility and Khurais oil field would produce at their pre-attack levels by the end of October. Compared with the September STEO, EIA revised OPEC spare capacity, most of which is located in Saudi Arabia, lower by an average of 200,000 b/d in the second half of 2019. Saudi Arabia's total capacity (including spare capacity) declined following the Abqaiq attack, and EIA expects Saudi Arabia will use some of its remaining spare capacity to backfill inventories and lost production through the end of 2019. Beginning in January 2020, EIA forecasts that OPEC spare capacity will return above 2.0 million b/d.

Crude oil prices increased sharply following the attacks; Brent front-month futures prices rose by nearly 15% on Monday, September 16, the first day of post-attack trading. This increase was the largest one-day percentage increase on record for Brent front-month futures prices. The increase was larger in the front months of the futures strip than in the later months, indicating the market expected the outage to be relatively short lived, and prices fell quickly after the attack (Figure 2). Saudi Arabia continued to export crude oil by drawing from inventories, increasing production in other fields, and reducing domestic refinery inputs. Abqaiq's relatively quick return to operations likely lessened the extent and duration of the price increases. Brent front-month futures prices fell to lower than pre-attack levels on October 1, settling at $59/b for the December contract and have fallen slightly since then.

Figure 2. Brent crude oil futures curves

The relatively quick return to pre-attack price levels likely reflects demand-side concerns and increased down-side price risk. Despite tighter forecast global petroleum markets in the second half of 2019, EIA expects that the Brent crude oil price will average $60.63/b in the second half of 2019, nearly unchanged from the $60.68/b forecast in the September STEO. EIA forecasts that global petroleum inventories will increase by nearly 550,000 b/d in the first half of 2020, which is expected to put downward pressure on crude oil prices. EIA forecasts the price of Brent crude oil to average $57.34/b during the first half of 2020. However, EIA expects the price of Brent crude oil to increase to $62.48/b in the second half of 2020 as global petroleum stock builds slow and petroleum balances are relatively tighter than during the first half of the year.

The price forecast is highly uncertain and supply or demand factors may emerge that could move prices higher or lower than EIA's current STEO forecast. Driven by revisions to global economic outlook, EIA has revised its 2019 liquid fuels demand growth outlook lower in the STEO for the last nine consecutive months and 2020 consumption has been revised down eight of the last nine months. EIA's price forecast also accounts for a higher level of petroleum supply risk in the aftermath of the attacks in Saudi Arabia.

U.S. average regular gasoline prices increase slightly, diesel prices fall

The U.S. average regular gasoline retail price rose less than 1 cent from the previous week to $2.65 per gallon on October 7, 26 cents lower than the same time last year. The West Coast price rose by nearly 10 cents to $3.64 per gallon, and gasoline prices in California continued to rise, increasing by 14 cents to $4.09 per gallon, 55% higher than the national average and 39 cents higher than the same time last year. The Midwest price increased by more than 1 cent to $2.50 per gallon, and the Rocky Mountain price increased by less than 1 cent, remaining at $2.71 per gallon. The Gulf Coast price fell by more than 4 cents to $2.28 per gallon, and the East Coast price fell by 2 cents to $2.49 per gallon.

The U.S. average diesel fuel price fell nearly 2 cents to $3.05 per gallon on October 7, 34 cents lower than a year ago. The East Coast and Gulf Coast prices each fell by more than 2 cents to $3.04 per gallon and $2.80 per gallon, respectively, the Midwest price fell by 2 cents $2.97 per gallon, the Rocky Mountain price decreased 1 cent to $3.02 per gallon, and the West Coast price decreased by less than 1 cent to $3.64 per gallon.

Propane/propylene inventories increase

U.S. propane/propylene stocks increased by 0.1 million barrels last week to 100.8 million barrels as of October 4, 2019, 11.9 million barrels (13.4%) greater than the five-year (2014-18) average inventory levels for this same time of year. Gulf Coast inventories increased by 1.0 million barrels, and Midwest inventories rose slightly, remaining virtually unchanged. East Coast inventories decreased by 0.9 million barrels, and Rocky Mountain/West Coast fell slightly, remaining virtually unchanged. Propylene non-fuel-use inventories represented 4.4% of total propane/propylene inventories.

Residential Heating Fuel Price Survey Begins This Week

Beginning this week and continuing through the end of March 2020, prices for wholesale and residential heating oil and propane will be included in This Week in Petroleum and on EIA's Heating Oil and Propane Update webpage.

As of October 7, 2019, residential heating oil prices averaged nearly $2.95 per gallon, 41 cents per gallon lower than at the same time last year. The average wholesale heating oil price for the start of the 2019–20 heating season is $1.99 per gallon, over 48 cents per gallon below the October 8, 2018, price.

Residential propane prices entered the 2019–20 heating season averaging nearly $1.86 per gallon, 53 cents per gallon less than the October 8, 2018, price. Wholesale propane prices averaged more than $0.58 per gallon, 43 cents per gallon lower than the same time last year.

Canada China crude oil exports imports production supply
3
2 0

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

The United States consumed a record amount of renewable energy in 2019

In 2019, consumption of renewable energy in the United States grew for the fourth year in a row, reaching a record 11.5 quadrillion British thermal units (Btu), or 11% of total U.S. energy consumption. The U.S. Energy Information Administration’s (EIA) new U.S. renewable energy consumption by source and sector chart published in the Monthly Energy Review shows how much renewable energy by source is consumed in each sector.

In its Monthly Energy Review, EIA converts sources of energy to common units of heat, called British thermal units (Btu), to compare different types of energy that are more commonly measured in units that are not directly comparable, such as gallons of biofuels compared with kilowatthours of wind energy. EIA uses a fossil fuel equivalence to calculate primary energy consumption of noncombustible renewables such as wind, hydro, solar, and geothermal.

U.S. renewable energy consumption by sector

Source: U.S. Energy Information Administration, Monthly Energy Review

Wind energy in the United States is almost exclusively used by wind-powered turbines to generate electricity in the electric power sector, and it accounted for about 24% of U.S. renewable energy consumption in 2019. Wind surpassed hydroelectricity to become the most-consumed source of renewable energy on an annual basis in 2019.

Wood and waste energy, including wood, wood pellets, and biomass waste from landfills, accounted for about 24% of U.S. renewable energy use in 2019. Industrial, commercial, and electric power facilities use wood and waste as fuel to generate electricity, to produce heat, and to manufacture goods. About 2% of U.S. households used wood as their primary source of heat in 2019.

Hydroelectric power is almost exclusively used by water-powered turbines to generate electricity in the electric power sector and accounted for about 22% of U.S. renewable energy consumption in 2019. U.S. hydropower consumption has remained relatively consistent since the 1960s, but it fluctuates with seasonal rainfall and drought conditions.

Biofuels, including fuel ethanol, biodiesel, and other renewable fuels, accounted for about 20% of U.S. renewable energy consumption in 2019. Biofuels usually are blended with petroleum-based motor gasoline and diesel and are consumed as liquid fuels in automobiles. Industrial consumption of biofuels accounts for about 36% of U.S. biofuel energy consumption.

Solar energy, consumed to generate electricity or directly as heat, accounted for about 9% of U.S. renewable energy consumption in 2019 and had the largest percentage growth among renewable sources in 2019. Solar photovoltaic (PV) cells, including rooftop panels, and solar thermal power plants use sunlight to generate electricity. Some residential and commercial buildings heat with solar heating systems.

October, 20 2020
Natural gas generators make up largest share of U.S. electricity generation capacity

operating natural-gas fired electric generating capacity by online year

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

Based on the U.S. Energy Information Administration's (EIA) annual survey of electric generators, natural gas-fired generators accounted for 43% of operating U.S. electricity generating capacity in 2019. These natural gas-fired generators provided 39% of electricity generation in 2019, more than any other source. Most of the natural gas-fired capacity added in recent decades uses combined-cycle technology, which surpassed coal-fired generators in 2018 to become the technology with the most electricity generating capacity in the United States.

Technological improvements have led to improved efficiency of natural gas generators since the mid-1980s, when combined-cycle plants began replacing older, less efficient steam turbines. For steam turbines, boilers combust fuel to generate steam that drives a turbine to generate electricity. Combustion turbines use a fuel-air mixture to spin a gas turbine. Combined-cycle units, as their name implies, combine these technologies: a fuel-air mixture spins gas turbines to generate electricity, and the excess heat from the gas turbine is used to generate steam for a steam turbine that generates additional electricity.

Combined-cycle generators generally operate for extended periods; combustion turbines and steam turbines are typically only used at times of peak load. Relatively few steam turbines have been installed since the late 1970s, and many steam turbines have been retired in recent years.

natural gas-fired electric gnerating capacity by retirement year

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

Not only are combined-cycle systems more efficient than steam or combustion turbines alone, the combined-cycle systems installed more recently are more efficient than the combined-cycle units installed more than a decade ago. These changes in efficiency have reduced the amount of natural gas needed to produce the same amount of electricity. Combined-cycle generators consume 80% of the natural gas used to generate electric power but provide 85% of total natural gas-fired electricity.

operating natural gas-fired electric generating capacity in selected states

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

Every U.S. state, except Vermont and Hawaii, has at least one utility-scale natural gas electric power plant. Texas, Florida, and California—the three states with the most electricity consumption in 2019—each have more than 35 gigawatts of natural gas-fired capacity. In many states, the majority of this capacity is combined-cycle technology, but 44% of New York’s natural gas capacity is steam turbines and 67% of Illinois’s natural gas capacity is combustion turbines.

October, 19 2020
EIA’s International Energy Outlook analyzes electricity markets in India, Africa, and Asia

Countries that are not members of the Organization for Economic Cooperation and Development (OECD) in Asia, including China and India, and in Africa are home to more than two-thirds of the world population. These regions accounted for 44% of primary energy consumed by the electric sector in 2019, and the U.S. Energy Information Administration (EIA) projected they will reach 56% by 2050 in the Reference case in the International Energy Outlook 2019 (IEO2019). Changes in these economies significantly affect global energy markets.

Today, EIA is releasing its International Energy Outlook 2020 (IEO2020), which analyzes generating technology, fuel price, and infrastructure uncertainty in the electricity markets of Africa, Asia, and India. A related webcast presentation will begin this morning at 9:00 a.m. Eastern Time from the Center for Strategic and International Studies.

global energy consumption for power generation

Source: U.S. Energy Information Administration, International Energy Outlook 2020 (IEO2020)

IEO2020 focuses on the electricity sector, which consumes a growing share of the world’s primary energy. The makeup of the electricity sector is changing rapidly. The use of cost-efficient wind and solar technologies is increasing, and, in many regions of the world, use of lower-cost liquefied natural gas is also increasing. In IEO2019, EIA projected renewables to rise from about 20% of total energy consumed for electricity generation in 2010 to the largest single energy source by 2050.

The following are some key findings of IEO2020:

  • As energy use grows in Asia, some cases indicate more than 50% of electricity could be generated from renewables by 2050.
    IEO2020 features cases that consider differing natural gas prices and renewable energy capital costs in Asia, showing how these costs could shift the fuel mix for generating electricity in the region either further toward fossil fuels or toward renewables.
  • Africa could meet its electricity growth needs in different ways depending on whether development comes as an expansion of the central grid or as off-grid systems.
    Falling costs for solar photovoltaic installations and increased use of off-grid distribution systems have opened up technology options for the development of electricity infrastructure in Africa. Africa’s power generation mix could shift away from current coal-fired and natural gas-fired technologies used in the existing central grid toward off-grid resources, including extensive use of non-hydroelectric renewable generation sources.
  • Transmission infrastructure affects options available to change the future fuel mix for electricity generation in India.
    IEO2020 cases demonstrate the ways that electricity grid interconnections influence fuel choices for electricity generation in India. In cases where India relies more on a unified grid that can transmit electricity across regions, the share of renewables significantly increases and the share of coal decreases between 2019 and 2050. More limited movement of electricity favors existing in-region generation, which is mostly fossil fuels.

IEO2020 builds on the Reference case presented in IEO2019. The models, economic assumptions, and input oil prices from the IEO2019 Reference case largely remained unchanged, but EIA adjusted specific elements or assumptions to explore areas of uncertainty such as the rapid growth of renewable energy.

Because IEO2020 is based on the IEO2019 modeling platform and because it focuses on long-term electricity market dynamics, it does not include the impacts of COVID-19 and related mitigation efforts. The Annual Energy Outlook 2021 (AEO2021) and IEO2021 will both feature analyses of the impact of COVID-19 mitigation efforts on energy markets.

Asia infographic, as described in the article text


Source: U.S. Energy Information Administration, International Energy Outlook 2020 (IEO2020)
Note: Click to enlarge.

With the IEO2020 release, EIA is publishing new Plain Language documentation of EIA’s World Energy Projection System (WEPS), the modeling system that EIA uses to produce IEO projections. EIA’s new Handbook of Energy Modeling Methods includes sections on most WEPS components, and EIA will release more sections in the coming months.

October, 16 2020