EIA: This Week in Petroleum - 7 August 2019 - eng Избранное

Среда, 07 августа 2019 22:12

EIA forecasts moderate inventory builds in 2020 and lowers crude oil price forecast

In the August 2019 Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) forecasts relatively flat crude oil prices for the remainder of 2019 and through 2020 and a balanced global oil market in 2019 followed by modest inventory builds in 2020 as production growth outpaces consumption growth (Figure 1). In 2019, EIA forecasts that upward pressure on crude oil prices from supply-side constraints will be largely offset by demand-side concerns. In 2020, despite increased crude oil demand resulting from new regulations from the International Maritime Organization (IMO 2020), production is expected to increase more, offsetting the price impacts from increased demand. As a result of the offsetting price pressures, EIA forecasts that crude oil prices will remain relatively flat through 2020.

Figure 1. World liquid fuels production and consumption balance

Although EIA does not directly collect data on changes in global petroleum inventories, inventory data for the United States and other countries within the Organization for Economic Cooperation and Development (OECD) provide some insight into the global balance. In the August STEO, EIA forecasts that OECD inventories will average 2.9 billion barrels in 2019 and 3.0 billion barrels in 2020, 0.6% and 0.8% more than their trailing five-year averages, respectively. Inventories can also be measured on a days of supply basis, which more accurately represents the potential buffer that inventories offer from supply constraints. In 2019, EIA forecasts OECD inventories will average 60.8 days, 0.6 days (1.0%) lower than the previous five-year (2014–18) average. In 2020, EIA forecasts OECD inventories will average 61.6 days, 0.5 days (0.8%) lower than the previous five-year (2015–19) average.

Crude oil inventories have increased during the past decade, and EIA expects OECD inventory levels will remain higher through the forecast period than in the first half of the decade (2010–14), which averaged 57.7 days or 2.7 billion barrels (Figure 2). Inventory levels near or slightly lower than the trailing five-year (2014–18) average would still provide a larger buffer than 2010–14 average inventory levels. In the August STEO, EIA expects that inventory levels will remain near their five-year averages and therefore will have some moderating effect on crude oil prices.

Figure 2. OECD commerical oil inventories

In the August STEO, EIA forecasts 2020 inventory builds of 280,000 barrels per day (b/d), but that outcome is highly dependent on crude oil production. EIA forecasts that total global production growth will increase year over year by 1.6 million b/d in 2020. U.S. total liquids production drives the forecast global production growth, and EIA expects that it will average 19.8 million b/d in 2019 and increase by 1.5 million b/d to 21.3 million b/d in 2020.

EIA forecast that production from members of the Organization of the Petroleum Exporting Countries (OPEC) will decrease in 2019 and in 2020 and offset some of the production increases from the United States. OPEC members and non-OPEC participants (OPEC+) agreed to extend production cuts through the end of the first quarter of 2020. EIA’s forecast assumes the OPEC+ agreement will remain in place through the end of the first quarter of 2020, with OPEC+ continuing to target a balanced market thereafter. The compliance with production targets from the OPEC+ agreement will not only be a key determinant of whether global crude oil inventories remain near the five-year (2014–18) average during the forecast period but also a significant driver of crude oil prices. EIA forecasts OPEC total liquids production will average 35.3 million b/d in the second half of 2019 and 34.8 million b/d in 2020, down from 37.3 million b/d in 2018.

Declining OPEC production is the result of Saudi Arabia’s over compliance with the December 2018 OPEC+ agreement in the first half of 2019 and rapidly decreasing crude oil production in Iran and Venezuela. Combined production in Iran and Venezuela fell to an estimated 2.8 million b/d in July 2019, a 2.3 million b/d decrease compared with July 2018. The declines in these two countries contributed to OPEC’s crude oil production averaging 29.6 million b/d in July 2019, the lowest level since April 2014.

EIA estimates that Iran’s crude oil and condensate production has decreased by 1.8 million b/d since May 2018, when the United States announced its plan to withdraw from the Joint Comprehensive Plan of Action and reinstate sanctions in November 2018. EIA assumes that U.S. sanctions on Iran’s oil exports will remain in place through the end of the forecast period. Although Iran’s crude oil production declined at an average rate of 120,000 b/d per month since May 2018, EIA expects the decline rate to slow in the second half of 2019 as domestic Iranian consumption grows as a result of power plants switching from natural gas to crude oil for electric power generation.

The United States recently extended the time period for several companies to continue operations in Venezuela involving state-owned Petróleos de Venezuela (PdVSA) by three months to October 25, 2019. This extension should provide some short-term continuity for crude oil production operations there; however, U.S. sanctions will still limit the production from Venezuela’s energy sector. Additionally, the possibility of energy sector disruptions remain and could remove crude oil from the global markets.

Markets have already incorporated some geopolitical risk from supply disruptions into crude oil prices, but additional disruptions may remove large volumes of crude oil from the global market and cause crude oil prices to increase. In Libya, supply disruptions remain a significant risk through 2020 because of the tentative security situation in the country and the lack of investment in existing infrastructure. Disruptions to shipping through the Strait of Hormuz could also cause crude oil prices to increase. In recent weeks, Iran has seized crude oil tankers in the Strait; however, crude oil transit in the region has not been significantly disrupted to date.

The August STEO reflects potential downside risks to both supply and demand. Based on forecasts from Oxford Economics, EIA lowered its global oil-weighted gross domestic product (GDP) growth projection to 2.1% in 2019 in the August STEO, down from 2.2% in the July STEO. International trade tensions are also contributing to demand-side concerns. On August 1, Brent and West Texas Intermediate (WTI) prices declined by more than 7% on the day following the U.S. announcement of new tariffs on China. EIA revised its global demand forecast down by 100,000 b/d to 100.9 million b/d in 2019 because of the downside risks to demand. Crude oil prices are also lower than previously expected, which, in combination with the downside demand risks, contributed to a lower forecast price for Brent crude oil in the August STEO. EIA’s August STEO forecasts that Brent crude oil will average $65 per barrel (b) in both 2019 and 2020, $1/b lower in 2019 and $2/b lower in 2020 compared with the July STEO.

Figure 3. Brent crude oil price forecast

EIA expects Brent crude oil prices will increase to $65/b during the next several months and remain there throughout 2020. As previously discussed, EIA expects this price to be a relatively stable price point for the market, considering modest levels of inventory growth in 2020 and IMO 2020 regulations going into effect. However, the combination of oil supply disruption risk and lower economic growth expectations in 2019 creates uncertainty in EIA’s crude oil price forecast. Given the uncertainty in these risk factors, prices could break out of the mid-$60/b range if the supply or demand concerns materialize in the coming months.

U.S. average regular gasoline and diesel prices fall

The U.S. average regular gasoline retail price decreased nearly 3 cents from the previous week to $2.69 per gallon on August 5, 16 cents lower than the same time last year. The Gulf Coast price fell nearly 4 cents to $2.39 per gallon, the East Coast price fell 3 cents $2.60 per gallon, the Midwest price fell nearly 3 cents to $2.63 per gallon, the West Coast price fell more than 1 cent to $3.29 per gallon, and the Rocky Mountain price fell nearly 1 cent to $2.70 per gallon.

The U.S. average diesel fuel price fell less than 1 cent, remaining at $3.03 per gallon on August 5, 19 cents lower than a year ago. The Gulf Coast price fell nearly 1 cent, remaining at $2.79 per gallon, and the West Coast, East Coast, and Rocky Mountain prices each fell less than 1 cent, remaining at $3.61 per gallon, $3.06 per gallon, and $2.97 per gallon, respectively. The Midwest price increased less than 1 cent, remaining at $2.94 per gallon

Propane/propylene inventories rise

U.S. propane/propylene stocks increased by 2.9 million barrels last week to 83.3 million barrels as of August 2, 2019, 6.8 million barrels (8.8%) greater than the five-year (2014-2018) average inventory levels for this same time of year. Gulf Coast, Midwest, and East Coast inventories increased by 2.0 million barrels, 0.5 million barrels, and 0.4 million barrels, respectively, while Rocky Mountain/West Coast inventories increased slightly, remaining virtually unchanged. Propylene non-fuel-use inventories represented 4.9% of total propane/propylene inventories.

For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.

Retail prices (dollars per gallon)

Conventional Regular Gasoline Prices Graph. On-Highway Diesel Fuel Prices Graph.
 Retail pricesChange from last
Gasoline 2.688 -0.027 -0.164
Diesel 3.032 -0.002 -0.191

Futures prices (dollars per gallon*)

Crude Oil Futures Price Graph. RBOB Regular Gasoline Futures Price Graph. Heating Oil Futures Price Graph.
 Futures pricesChange from last
Crude oil 55.66 -0.54 -12.83
Gasoline 1.782 -0.092 -0.284
Heating oil 1.890 -0.014 -0.237
*Note: Crude oil price in dollars per barrel.

Stocks (million barrels)

U.S. Crude Oil Stocks Graph. U.S. Distillate Stocks Graph. U.S. Gasoline Stocks Graph. U.S. Propane Stocks Graph.
 StocksChange from last
Crude oil 438.9 2.4 31.5
Gasoline 235.2 4.4 1.3
Distillate 137.5 1.5 12.0
Propane 83.303 2.852 16.923


 StocksChange from last
Crude oil 436.5 -8.5 27.8
Gasoline 230.7 -1.8 -0.2
Distillate 135.9 -0.9 11.7
Propane 80.451 1.399 14.175
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