US oil output will drop by 1.81 mil b/d from March 2020 to March 2021: EIA

The US Energy Information Administration on Tuesday cut its US oil output forecast by 1.23 million b/d for 2020 and by 1.63 million b/d for 2021 due to declining prices caused by the global spread of the coronavirus and the collapse of the OPEC+ supply cut agreement.

"Typically, price changes impact production after about a six-month lag," EIA said in its monthly Short-Term Energy Outlook. "However, current market conditions, combined with the COVID-19 pandemic, will likely reduce this lag as many producers have already announced plans to reduce capital spending and drilling levels."

EIA forecasts US oil output will average 11.76 million b/d in 2020 and 11.03 million b/d in 2021. In March, it forecast US oil output would average 12.99 million b/d in 2020 and 12.66 million b/d in 2021.

US oil output averaged a record 12.23 million b/d in 2019.

EIA said Tuesday it now expects US monthly oil output to fall as low as 10.91 million b/d in March 2021, its lowest level since July 2018 and a decline of 1.81 million b/d from March 2020's production level.

EIA now forecasts WTI and Brent spot prices will average $29.34/b and $33.04/b, respectively, in 2020, down $8.85/b and $10.26/b, respectively, from last month's forecast. EIA sees WTI and Brent averaging $41.12/b and $45.62/b, respectively, in 2021, down $9.24/b and $9.74/b, respectively, from last month's forecast.

EIA said the ongoing coronavirus containment measures will continue to reduce liquid fuel consumption and slow domestic refinery activity. Still, it said crude supply will continue to climb in the near term due to the now suspended OPEC+ agreement. The report assumes that another OPEC+ agreement will not be reached.

"Only gradual increases in crude oil prices are expected through all of 2020 as these factors persist, which could lead to record levels of expected global oil inventory builds in the first half of 2020," EIA said.