US EIA cuts 2021 global oil demand growth by 500,000 b/d on China outlook

Washington — The US Energy Information Administration has cut its outlook for 2021 global oil demand growth by 500,000 b/d from last month's forecast to 6.5 million b/d on lower expected consumption growth in China.

EIA now sees China demand growing 1 million b/d next year, down from 1.5 million b/d in last month's forecast, it said Sept. 9 in its latest Short-Term Energy Outlook.

Global oil demand grew by 1 million b/d in August, the slowest month-on-month increase since demand started recovering from coronavirus lockdowns in May, EIA said. August also marked the first time during the recovery period that global supply growth surpassed demand growth.

"Despite the different pace of increase between global oil production and consumption during August, EIA forecasts oil market balances to continue tightening for the remainder of 2020 as a result of continued demand recovery, restrained production from [OPEC+] and price-related declines in production from the United States," the report said.

US oil production is set to average 11.38 million b/d in 2020, EIA said, raising its outlook by 120,000 b/d from last month. It sees US oil output slipping to 11.08 million b/d in 2021.

EIA estimates US oil production jumped 400,000 b/d month on month to 11.2 million b/d in September, as a result of operators bringing wells back online after the spring's price crash and despite offshore Gulf of Mexico operators shutting in production during Hurricane Laura.

EIA sees US oil output declining slightly after September, averaging just under 11 million b/d in the first half of 2021. It predicts new drilling activity will not offset declines from existing wells.

Domestic production will start to rise again in H2 2021 to average 11.08 million b/d for the full year, reaching a high of 11.43 million b/d in December.

EIA raised its 2020 crude price outlooks by about 50 cents/b from last month but trimmed its 2021 predictions by the same amount.

WTI crude futures are expected to average $38.99/b in 2020 and $45.07/b in 2021, EIA said. Brent prices are expected to average $41.90/b in 2020 and $49.07/b in 2021.