Brent crude oil prices to remain flat through second half of 2019

Prices of international benchmark Brent crude oil are expected to remain $64 per barrel in the second half of 2019 and rise $1 to $65 per barrel in 2020, according to the U.S. Energy Information Administration (EIA). The EIA on Tuesday (Aug. 6) released its Short-Term Energy Outlook that includes projections for the oil and gas industry.

The expected price stability in crude oil prices is the result of expectations for a balanced global oil market. Global oil inventories are projected to rise by 100,000 barrels per day in 2019 and 300,000 barrels per day in 2020.

With regard to West Texas Intermediate (WTI) crude oil, the price difference between WTI and Brent is projected to decrease about $1.10 per barrel, with WTI at $5.50 per barrel less than Brent in the fourth quarter of 2019 and in 2020. The narrowing spread can be attributed to the easing transportation constraints from the Permian Basin to refineries and export terminals on the U.S. Gulf Coast.

U.S. crude oil production is expected to average 12.3 million barrels per day in 2019 and 13.3 million barrels per day in 2020, both of which would be record levels. U.S. regular gasoline prices reached a peak in May at $2.86 per gallon and should fall to an average of $2.64 per gallon in September. The prices are expected to average $2.62 per gallon in 2019 and $2.71 per gallon in 2020.

With regard to natural gas, the Henry Hub natural gas spot price is expected to average $2.36 per million British thermal units in the second half of 2019. Natural gas prices are projected to rise to $2.75 per million British thermal units in 2020. Prices are expected to rise to bring balance to supply as domestic and export demand rises in 2020. U.S. dry natural gas production will rise 7.6 billion cubic feet per day to 91 billion cubic feet per day in 2019, from 2018. Natural gas production will rise in late 2019 and fall in the first quarter of 2020 as a result of the low prices in the second half of 2019 leading to a reduction in natural gas-directed drilling. Production growth is projected to rise in the second quarter of 2020, and natural gas production is expected to increase to 92.5 billion cubic feet per day in 2020. Natural gas inventories are expected to rise by 16% to 3.7 trillion cubic feet at the end of October, from the same time in 2018, and they will be slightly higher than the five-year average.

With regard to electricity prices, the average wholesale electricity prices are expected to be lower in 2019, than in 2018, as a result of lower costs for natural gas. The annual declines range from 0.2% in the Southwest Power Pool to 28% in the Electricity Reliability Council of Texas market.