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EIA Lowers 2020, 2021 Oil & Natural Gas Price Forecasts
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In a monthly report, the U.S. Energy Information Administration (“EIA”) reduced its oil and natural gas price forecasts for 2020 and 2021.
Let us drill down EIA’s most recent Short-Term Energy Outlook:
Oil
Price: The EIA lowered its 2020 view on WTI crude — the U.S. benchmark — by 23 cents to $38.76 a barrel, and pulled back its price forecast for next year by 35 cents to $44.72 a barrel. The reason for the downward adjustment to price realizations is the deceleration in the degree of recovery in oil consumption amid a spike in infections.
Production: The agency forecasts that U.S. crude oil output will fall by 800,000 barrels per day to 11.45 million barrels per day (MMbbl/d) in 2020. Last month, it expected an 870,000 barrel-per-day year-over-year decrease to 11.38MMbbl/d. The raised production outlook reflects stronger oil prices, prompting more companies to reactivate their coronavirus-hampered production. The likes of Zacks Rank #2 (Buy) Parsley Energy and Pioneer Natural Resources have already brought some previously shut-in production back online in America’s biggest oil field — Permian Basin in the western part of Texas and the south-eastern part of New Mexico.
For 2021, it sees production to fall more than previously expected — decreasing 360,000 barrels per day to 11.09 MMbbl/d. In September, the EIA expected a 300,000-barrel-per-day-decline to 11.08MMbbl/d. The downward revision is a pointer to the fact that new drilling activity will be insufficient to compensate lower output from existing wells.
Demand: Meanwhile, the EIA has projected that domestic oil demand for 2020 is set to contract by 2.31MMbbl/d on coronavirus woes, more than its previous forecast of 2.12 MMbbl/d decline. But next year, crude consumption is expected to rebound by 1.74 MMbbl/d versus 1.64 MMbbl/d previously.
Natural Gas
Price: The EIA forecasts an average price of $2.07 per MMBtu over the course of 2020, down 4.2% from the September forecast. It expects 2021 prices to average $3.13 per MMBtu, 1.9% lower than the previous forecast. The reductions are due to storm-related LNG demand disruptions.
But as one can see, the commodity’s price is set for an uptick in 2021, primarily due to lower year-over-year domestic production that is expected to result in a tighter market going into 2021. The upward trend should aid gas-weighted producers like SilverBow Resources, Inc. (SBOW - Free Report) , Gulfport Energy Corporation (GPOR - Free Report) , Range Resources (RRC - Free Report) and Comstock Resources (CRK - Free Report) .
Production: U.S. dry natural gas production is forecast to fall from an all-time high of 93.06 billion cubic feet a day (Bcf/d) in 2019 to 90.64 Bcf/d in 2020. However, the latest October output projection for 2020 was up from the EIA's 89.88-Bcf/d forecast in September.
Analysts believe that the brake in skyrocketing shale oil production growth — tied to the crude price collapse — will limit associated gas output, thereby cutting the massive supply glut. As a proof of the supply drop, natural gas production continues to be curtailed, with domestic volumes receding more than 8% year over year.
For 2021, it sees production to fall more than previously expected — decreasing 3.83Bcf/d to 86.81Bcf/d. In September, the EIA expected a 3.29-Bcf/d decline to 86.59Bcf/d.
Demand: EIA projected domestic gas consumption to decrease to 83.66 Bcf/d this year from a record 85.20Bcf/d in 2019 due to warmer-than-expected winter 2019-2020 and a coronavirus-induced drop off in usage. However, the agency’s most-recent 2020 demand projection is up from EIA's 82.68-Bcf/d forecast for the year in its September report.
Next year, natural gas usage is expected to fall by 4.93 Bcf/d versus 3.54 Bcf/d previously. Per the EIA, higher natural prices in 2021 will reduce electric power demand.
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EIA Lowers 2020, 2021 Oil & Natural Gas Price Forecasts
In a monthly report, the U.S. Energy Information Administration (“EIA”) reduced its oil and natural gas price forecasts for 2020 and 2021.
Let us drill down EIA’s most recent Short-Term Energy Outlook:
Oil
Price: The EIA lowered its 2020 view on WTI crude — the U.S. benchmark — by 23 cents to $38.76 a barrel, and pulled back its price forecast for next year by 35 cents to $44.72 a barrel. The reason for the downward adjustment to price realizations is the deceleration in the degree of recovery in oil consumption amid a spike in infections.
Production: The agency forecasts that U.S. crude oil output will fall by 800,000 barrels per day to 11.45 million barrels per day (MMbbl/d) in 2020. Last month, it expected an 870,000 barrel-per-day year-over-year decrease to 11.38MMbbl/d. The raised production outlook reflects stronger oil prices, prompting more companies to reactivate their coronavirus-hampered production. The likes of Zacks Rank #2 (Buy) Parsley Energy and Pioneer Natural Resources have already brought some previously shut-in production back online in America’s biggest oil field — Permian Basin in the western part of Texas and the south-eastern part of New Mexico.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For 2021, it sees production to fall more than previously expected — decreasing 360,000 barrels per day to 11.09 MMbbl/d. In September, the EIA expected a 300,000-barrel-per-day-decline to 11.08MMbbl/d. The downward revision is a pointer to the fact that new drilling activity will be insufficient to compensate lower output from existing wells.
Demand: Meanwhile, the EIA has projected that domestic oil demand for 2020 is set to contract by 2.31MMbbl/d on coronavirus woes, more than its previous forecast of 2.12 MMbbl/d decline. But next year, crude consumption is expected to rebound by 1.74 MMbbl/d versus 1.64 MMbbl/d previously.
Natural Gas
Price: The EIA forecasts an average price of $2.07 per MMBtu over the course of 2020, down 4.2% from the September forecast. It expects 2021 prices to average $3.13 per MMBtu, 1.9% lower than the previous forecast. The reductions are due to storm-related LNG demand disruptions.
But as one can see, the commodity’s price is set for an uptick in 2021, primarily due to lower year-over-year domestic production that is expected to result in a tighter market going into 2021. The upward trend should aid gas-weighted producers like SilverBow Resources, Inc. (SBOW - Free Report) , Gulfport Energy Corporation (GPOR - Free Report) , Range Resources (RRC - Free Report) and Comstock Resources (CRK - Free Report) .
Production: U.S. dry natural gas production is forecast to fall from an all-time high of 93.06 billion cubic feet a day (Bcf/d) in 2019 to 90.64 Bcf/d in 2020. However, the latest October output projection for 2020 was up from the EIA's 89.88-Bcf/d forecast in September.
Analysts believe that the brake in skyrocketing shale oil production growth — tied to the crude price collapse — will limit associated gas output, thereby cutting the massive supply glut. As a proof of the supply drop, natural gas production continues to be curtailed, with domestic volumes receding more than 8% year over year.
For 2021, it sees production to fall more than previously expected — decreasing 3.83Bcf/d to 86.81Bcf/d. In September, the EIA expected a 3.29-Bcf/d decline to 86.59Bcf/d.
Demand: EIA projected domestic gas consumption to decrease to 83.66 Bcf/d this year from a record 85.20Bcf/d in 2019 due to warmer-than-expected winter 2019-2020 and a coronavirus-induced drop off in usage. However, the agency’s most-recent 2020 demand projection is up from EIA's 82.68-Bcf/d forecast for the year in its September report.
Next year, natural gas usage is expected to fall by 4.93 Bcf/d versus 3.54 Bcf/d previously. Per the EIA, higher natural prices in 2021 will reduce electric power demand.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>