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Last Updated: September, 11 2019 12:44:15 PM
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Forecast HighlightsGlobal liquid fuels

  • Brent crude oil spot prices averaged $59 per barrel (b) in August, down $5/b from July and $13/b lower than the average from August of last year. EIA forecasts Brent spot prices will average $60/b in the fourth quarter of 2019 and $62/b in 2020. EIA forecasts that West Texas Intermediate (WTI) prices will average $5.50/b less than Brent prices in 2020.
  • EIA forecasts that global liquid fuels consumption will increase by 0.9 million barrels per day (b/d) in 2019, down from year-over-year growth of 1.3 million b/d in 2018. The slowing liquid fuels demand growth reflects EIA’s assumption (based on forecasts from Oxford Economics) of decelerating growth in the global oil-weighted gross domestic product (GDP). EIA expects that global liquid fuels demand will increase by 1.4 million b/d in 2020 as a result of an expected increase in global GDP growth.
  • EIA forecasts U.S. crude oil production will average 12.2 million b/d in 2019, up by 1.2 million from the 2018 level. Forecast crude oil production then rises by 1.0 million b/d in 2020 to an annual average of 13.2 million b/d. The slowing rate of crude oil production growth reflects relatively flat crude oil price levels and slowing growth in well-level productivity.

World liquid fuels production and consumption balance

Natural gas
  • The Henry Hub natural gas spot price averaged $2.22 per million British thermal units (MMBtu) in August, down 15 cents/MMBtu from July. This summer, prices have declined amid rising natural gas production, despite high levels of both natural gas exports and consumption in the electricity generation sector. Based on recent price movements and EIA’s assessment that natural gas production will be sufficient to meet expected demand and export levels at a lower price than previously forecasted, EIA lowered its Henry Hub spot price forecast for 2020 to an average of $2.55/MMBtu, 20 cents/MMBtu lower than the August forecast.
  • EIA forecasts that U.S. dry natural gas production will average 91.4 billion cubic feet per day (Bcf/d) in 2019, up 8.0 Bcf/d from 2018. EIA expects monthly average natural gas production to grow in late 2019 and then decline slightly during the first quarter of 2020 as the lagged effect of low prices in the second half of 2019 reduces natural gas-directed drilling. However, EIA forecasts that growth will resume in the second quarter of 2020, and natural gas production in 2020 will average 93.2 Bcf/d.
  • Natural gas storage injections have outpaced the five-year (2014–18) average so far during the 2019 injection season as a result of rising natural gas production. At the beginning of April, the natural gas inventory injection season started with working inventories 28% lower than the five-year average for the same period. By the week ending August 30, working gas inventories were 82 billion cubic feet (Bcf), or 3%, lower than the five-year average of 3,023 Bcf. EIA forecasts that natural gas storage levels will be 3,769 Bcf by the end of October, which is slightly higher than the five-year average and 16% higher than October 2018 levels.

U.S. natural gas prices

Electricity, coal, renewables, and emissions
  • EIA expects the share of U.S. total utility-scale electricity generation from natural gas-fired power plants will rise from 34% in 2018 to 37% in 2019 and 38% in 2020. EIA forecasts that the share of U.S. generation from coal will average 25% in 2019 and 22% in 2020, down from 28% in 2018. EIA’s forecast nuclear share of U.S. generation remains at about 20% in 2019 and in 2020. Hydropower averages a 7% share of total U.S. generation in the forecast for 2019 and 2020, similar to 2018. Wind, solar, and other nonhydropower renewables together provided 10% of U.S. total utility-scale generation in 2018. EIA expects they will provide 10% in 2019 and 12% in 2020.
  • EIA forecasts generally lower wholesale electricity prices in 2019 compared with 2018. The lower forecast prices reflect lower natural gas fuel costs. The first half of 2019, the average U.S. cost of natural gas delivered to power generators was 9% lower than the same period in 2018. EIA expects the delivered cost of natural gas during the second half of 2019 to be 31% lower than last year. Forecast electricity prices in the southeast are less than 1% lower than in 2018, while prices in New England are 28% lower.
  • EIA forecasts that U.S. coal production in the second half of 2019 will be 328 million short tons (MMst), or 59 MMst (15%) less than in the second half of 2018. EIA expects that coal exports will continue to fall during the projection period as international demand for U.S. coal is dampened by high Atlantic freight costs in the near term and increased uncertainty in the metallurgical coal market in the longer term. EIA forecasts that U.S. coal consumption will total 593 MMst in 2019 and 548 MMst in 2020, a decline of 14% in 2019 and 8% in 2020.
  • EIA forecasts that utility-scale renewable fuels, including wind, solar, and hydropower, will collectively produce 18% of U.S. electricity in 2019 and 19% in 2020. EIA expects that annual generation from wind will surpass hydropower generation for the first time in 2019 to become the leading source of renewable electricity generation and that it will maintain that position in 2020.
  • EIA expects electric power sector generation from renewables other than hydropower—principally wind and solar—to grow from 409 billion kilowatthours (kWh) in 2019 to 467 billion kWh in 2020. In EIA’s forecast, Texas accounts for 19% of the U.S. nonhydro renewables generation in 2019 and 21% in 2020. California has a share of 15% in 2019 and 14% in 2020. Regionally, the Midwest and Central power regions each have shares in the 16% to 17% range of the U.S. generation total from renewables other than hydropower.
  • EIA forecasts that, after rising by 2.7% in 2018, U.S. energy-related carbon dioxide (CO2) emissions will decline by 2.5% in 2019 and by 1.0% in 2020. In 2019, EIA forecasts that space cooling demand (as measured in cooling degree days) will be lower than in 2018 when it was 13% higher than the previous 10-year (2008–17) average. In addition, EIA expects U.S. CO2 emissions in 2019 to decline because the forecast share of electricity generated from natural gas and renewables is increasing while the forecast share generated from coal, which is a more carbon-intensive energy source, is decreasing.

U.S. residential electricity price

electricity coal renewable emissions natural gas STEO EIA liquid fuels USA
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September, 21 2019
Your Weekly Update: 16 - 20 September 2019

Market Watch  

Headline crude prices for the week beginning 16 September 2019 – Brent: US$69/b; WTI: US$63/b

  • Global crude oil prices surged at the start of the week as news that a successful drone strike on the Abqaiq processing plant and the Khurais oil field in Saudi Arabia took out over half of the Kingdom’s crude production capacity
  • Brent prices jumped above US$70/b at one point on fears on global supply disruption, but abated as President Donald Trump authorises the release of US strategic petroleum reserves to cover the market
  • Initial fears that the Saudi Arabian crude output would be crippled for months proved to be extreme, with Saudi Aramco announcing that some 70% of capacity at Abqaiq had been restored within days
  • But more worryingly is that this incident escalates the risk of a full-blown military confrontation with Iran; the US was quick to accuse Iran of the attack, citing data on the attack, which was denied by Iran
  • Yemen’s Iran-backed Houthi rebels claimed responsibility for the attack, although initial results of a Saudi investigation pointed to the weapons originating from Iran
  • For now, crude oil prices have retreated as the risk of widespread supply disruption abated, but tensions are still high in the region
  • This comes after President Trump signals that he was considering easing sanctions in an apparent thaw in the US-Iran relationship; this opportunity now appears to have evaporated
  • Saudi Arabia’s new oil energy minister, Prince Abdulaziz bin Salman, made a positive impression at the recent OPEC+ meeting, with errant members of the group signalling that they were now ready to adhere to the supply deal
  • In Venezuela, the oil crisis continues as ongoing US sanctions now mean that the country cannot find enough vessels to transport its crude, as shippers fear losing insurance coverage if they transport Venezuelan oil
  • Iran has released the UK-flagged Stena Impero vessel that it had impounded, a lone bright spot in a region now clouded by geopolitical tensions
  • Against this backdrop, the US active rig count recorded yet another fall, losing five oil and seven gas rigs for a net drop of 12 to a new total of 886 rigs
  • With the shock of the Saudi drone attacks abating, crude oil prices are retreating back to their previous range – US$60-63 for Brent and US$56-59/b for WTI – as the impact of global supply was minimised; another attack, however, might cause a more permanent shift in prices


Headlines of the week

Upstream

  • Equinor has received consent from the Norwegian Petroleum Directorate to continue operations at the Tordis and Vigdis fields through 2036 and 2040, respectively, extending the life of the North Sea fields by 34 years
  • BP has announced that it will deploy continuous measurement of methane emissions for all future oil and gas projects in a bid to reduce emissions
  • CNOPC and Niger have agreed to collaborate on a 1,892km pipeline to carry oil from Niger’s Agadem rift basin to port facilities in Benin
  • The South African government is tabling a new law that will allow the state to take a free stake of up to 10% in all new oil and gas ventures, hoping to capitalise on a surge in upstream interest after Total’s Brulpadda discovery

Midstream/Downstream

  • As the IMO deadline for low-sulfur marine fuels approaches, refiners have begun stockpiling supplies of very low-sulfur fuel oil to ensure adequate supply; this includes Japan’s Cosmo Oil that aims to begin supplying VLSFO to the domestic marine market by October 2019
  • IndianOil’s Gujarat refinery stated it ready to produce 12,900 b/d of VLSFO by October while its Haldia refinery will start producing 5,500 b/d of VLSFO by December; this should be adequate to cover the India’s marine fuel demand
  • India is considering selling a stake in BPCL, the country’s second largest refiner, to an international firm to boost competition in downstream fuel retailing that has historically been dominated by state firms
  • Valero Energy and Darling Ingredients are launching the first renewable gasoil plant in Texas, focusing on producing renewable diesel and naphtha
  • In the UK, Essar Oil’s Stanlow refinery aims to increase its diet of US crude from a current 35% to 40%, leveraging on cheaper American oil
  • The after-effects of Russia’s contaminated crude through the Druzhba pipeline continues as Total issues a tender to sell 1.3 million barrels of tainted Ural crude through Rotterdam after failing to process it

Natural Gas/LNG

  • Poland has won a ruling from the EU courts to reduce Russian control over the key EU Opal pipeline that carries Russian gas from the Nord Stream link to Germany, preventing Gazprom from using most of Opal capacity in a bit to increase energy security for Eastern European countries
  • Vitol and Mozambique’s state player ENH have set up a new joint venture in Singapore to capitalise on trading opportunities for LNG, LPG, and condensate
  • Australia’s Liquefied Natural Gas Ltd and Delta Offshore Energy will supply gas from the Magnolia fields to an LNG-to-power project in Bac Lieu, Vietnam
  • Eni’s Baltim South West gas field offshore Egypt has started up production, only 3 years after discovery, producing an initial 100 mscf/d of gas
  • US gas player Sempra is looking to take FID on its Energia Costa Azul LNG project in Mexico’s Baja California region by the end of 2019
  • Egypt has announced that it expects to receive first natural gas from Israel by end-2019 through the East Mediterranean Gas pipeline, with initial supplies of 200 mscf/d that will rise to 500 mscf/d by 2020
  • The Independence floating LNG terminal in Lithuania – built to reduce the Baltic region’s dependence on Russian gas – is set to receive its first-ever cargo from Siberia, likely from Novatek’s LNG projects in Yamal
September, 20 2019
Financial Review: Second-Quarter 2019
Key findings
  • Brent crude oil daily average prices were 9% lower in second-quarter 2019 than in second-quarter 2018 and averaged $68 per barrel
  • The 117 companies in this study increased their combined liquids production 4.6% in second-quarter 2019 from second-quarter 2018, and their natural gas production increased 5.0% during the same period
  • Nearly half of the companies were free cash flow positive—that is, they generated more cash from operations than their capital expenditures
  • Dividends plus share repurchases were nearly one-third of cash from operations, slightly lower than the six-year high set in first-quarter 2019

Distributions to shareholders via dividends and share repurchases amounted to nearly 33% of cash from operations


See entire second-quarter review

September, 20 2019