Global liquid fuels production is expected to exceed global consumption through 2020 even as the supply declines from several crude oil-producing countries, including Saudi Arabia, Libya, Venezuela and Canada, according to the U.S. Energy Information Administration (EIA).
In EIA’s Short-Term Energy Outlook for February, the average price of international benchmark Brent crude oil is expected to be $61 per barrel in 2019 and $62 per barrel in 2020. Global oil consumption is projected to fall, while U.S. crude oil production is projected to rise, offsetting short-term supply reductions. Global petroleum stocks are expected to rise through 2019 and 2020 at a rate of 440,000 and 630,000 barrels per day, respectively, as prices remain flat.
An agreement among members of the Organization of the Petroleum Exporting Countries (OPEC) and several non-OPEC countries to reduce production by 1.2 million barrels per day went into effect in January. Global crude oil supply fell because Saudi Arabia cut production beyond what it had agreed to do. Other impacts on OPEC output include a rise in unplanned supply outages in Libya and U.S. sanctions on Venezuela’s state-owned oil company, Petroleos de Venezuela S.A. Also, the Canadian province of Alberta established production restraints, cutting supply by about 420,000 barrels per day from December to January.
The reductions in crude oil production are likely contributing to rising prices of medium and heavy crude oils. OPEC and Canada produce these oil grades. U.S. crude oil is lighter and sweeter.
U.S. refinery runs are not expected to decline significantly as a result of the tightening supply of heavy crude oil, according to the EIA. The refineries could process lighter crude oils if transportation constraints restrict the availability of heavy crude oils.
The U.S. Department of Energy’s Office of Fossil Energy announced Thursday (Feb. 28) the sale of up to 6 million barrels of crude oil from the Strategic Petroleum Reserve. The United States has been drawing down its crude oil reserve as a result of the Bipartisan Budget Act of 2015. The act allows the federal agency to draw down and sell up to $2 billion of crude oil from the reserve, for fiscal years 2017 through 2020.