International benchmark Brent crude oil prices are expected to become stable in mid-2021 and reach an average of about $68 per barrel in the third quarter before declining to an average of $60 per barrel in 2022, according to the U.S. Energy Information Administration (EIA).
The projection was included in EIA’s Short-Term Energy Outlook for June that was released Tuesday (June 8) and showed crude oil prices have risen 25% to an average of $68 per barrel in May, from January.
“In the coming months, we expect global oil production to catch up with the increases we’ve seen in demand in 2021,” said EIA Acting Administrator Stephen Nalley. “U.S. and global oil producers are increasing their production, which should help moderate oil prices that have increased significantly as global economic concerns about the COVID-19 pandemic have begun to ease.”
The U.S. economy continues to recover after reaching multiyear lows in the second quarter of 2020. The rise in economic activity and easing of the pandemic have contributed to rising energy use. U.S. GDP is expected to rise by 6.7% in 2021 and by 4.9% in 2022, based on IHS Markit forecasts.
The EIA’s expectations for a rise in global oil production are largely a result of the decision by the Organization of the Petroleum Exporting Countries (OPEC) and other oil-producing countries to increase production. The production increase is expected to end the global inventory draws that have happened over the past year and lead to a more balanced global oil market in the second half of 2021. The rise in production, increase in U.S. tight oil production and other supply growth are expected to outpace moderating growth in global oil consumption and contribute to declining oil prices.
Global petroleum and liquid fuels consumption is expected to rise by 6% to 97.7 million barrels per day in 2021 and rise by 4% to 101.3 million barrels per day in 2022. As a result of an increase in global demand, U.S. crude oil production is expected to increase by 4% to 11.8 million barrels per day in 2022, from 2020. OPEC production is expected to rise by 12% to 28.7 million barrels per day in 2022, from 2020.
Following are other highlights in the June Short-Term Energy Outlook:
- U.S. regular gasoline prices are expected to be an average of $2.92 per gallon in the summer driving season, from April through September. Monthly average gasoline prices this summer are expected to reach a peak of $3.03 per gallon in June.
- U.S. small-scale solar electricity capacity is expected to rise by 9 gigawatts in 2021 and 2022.
- The natural gas spot price at Henry Hub is expected to be an average of $3.07 per million British thermal units for 2021 and $2.93 per million British thermal units in 2022 amid slowing growth in liquefied natural gas exports and rising U.S. natural gas production.
- Dry natural gas production is expected to be an average of 92.9 billion cubic feet per day in the second half of 2021 and rise to 93.9 billion cubic feet per day in 2022.
- Natural gas consumption is expected to fall by 0.5% to 82.9 billion cubic feet per day in 2021, from 2020, and narrowly decrease to an average of 82.8 billion cubic feet per day in 2022.
- U.S. coal production is expected to be 600 million short tons in 2021. This is 3% higher than the May outlook because of the projected increase in coal exports and inventory levels.