11 Mar 2020 | 20:15 UTC — Washington

STEO snapshot: EIA slashes oil price, demand, supply projections

The recent oil-price collapse led the US Energy Information Administration Wednesday to cut its forecast for global oil demand 50% from earlier this year, drop some oil price projections by more than $24/b and predict that a peak in US oil output may arrive next month.

A closer look at the EIA's latest Short-Term Energy Outlook:

EIA slashed another 660,000 b/d from its outlook for 2020 global oil demand growth, now predicting growth of 370,000 b/d from 2019. This is down from 1.34 million b/d in its January short-term outlook, before the coronavirus outbreak became severe in China and started spreading globally.

S&P Global Platts Analytics has a current base case of 240,000 b/d of oil demand growth in 2020 but a worst-base "global epidemic" scenario that would contract oil demand by 975,000 b/d from 2019 levels, said Claudio Galimberti, head of refining and demand analytics.

"The reason we called it 'global epidemic' and not pandemic has to do with the fact that we assumed this virus to hit different regions of the world at different times: Europe and Middle East in March, Americas in April and the rest of the world in May," he said.

Galimberti said the projection assumes it takes three months for a region to fully recover.

EIA now forecasts WTI spot prices to average $38.19/b in 2020 and $50.36/b in 2021, down $17.52 and $11.67, respectively, from last month's forecast. Brent is now forecast to average $43.30/b this year and $55.36/b next year, down $17.95 and $12.17, respectively, from last month's report.

EIA projects that WTI spot prices will average $30/b in both April and May, which would be the lowest average for two straight months since September and October 2003, when prices averaged $28.03/b and $30.34/b.

EIA now forecasts WTI prices to average $35/b in September, $24.50 below what the agency was forecasting for September last month.

US oil production, which the EIA predicted last month would cross the 14 million b/d threshold in late 2021, is now forecast to peak just above 13.2 million b/d next month and then fall by as much as 660,000 b/d into 2021 as US shale operators struggle with low prices.

EIA said it expects US oil production growth in 2020 to take place largely in the Permian. But in 2021, the Permian is expected to have no growth and the Bakken and Eagle Ford are forecast to have the largest falls.


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