Brent crude oil prices are on track to average $105/bbl this year, with recent trends showing a sharp drop-off in prices over the past month, the Energy Information Administration (EIA) said in updated forecasting published Tuesday.

STEO

Between July 1 and Aug. 4, prices at the global crude benchmark fell $17.51, while front-month West Texas Intermediate futures dropped $19.89 over the same period, the agency said in its latest Short-Term Energy Outlook (STEO).

For 2023, EIA modeled an average Brent price of $95/bbl. 

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Prices moving forward are “subject to heightened uncertainty” and will be influenced by “how sanctions affect Russia’s oil production, the production decisions of OPEC-Plus, the rate at which U.S. oil and natural gas production rises, and other contributing factors,” researchers said. “Less robust economic activity in our forecast could result in lower-than-forecast energy consumption.”

Domestic crude production is set to average 11.9 million b/d this year before climbing to 12.7 million b/d in 2023, according to the latest STEO. This would surpass the current record for U.S. crude production of 12.3 million b/d set in 2019, the agency said.

On the demand side, global consumption of petroleum and liquid fuels clocked in at an estimated 98.8 million b/d in July, up 0.9 million b/d year/year. Global consumption is projected to average 99.4 million b/d for full-year 2022, a 2.1 million b/d year/year increase. Another 2.1 million b/d increase would see global consumption average a projected 101.5 million b/d next year, the updated STEO data show.

$7.54 Henry Hub Seen for 2H2022

Meanwhile, natural gas spot prices at Henry Hub are on track to average $7.54/MMBtu for the second half of 2022 before falling to $5.10 in 2023 on rising production, EIA said in its latest monthly forecast.

Prices at the national benchmark averaged $7.28 in July, according to EIA. That’s down sequentially from average prices of $7.70 in June and $8.14 in May, owing to incremental slack in the market following the extended outage at the Freeport LNG terminal, researchers said.

However, prices strengthened markedly between July 1 and July 29 amid “continued high demand” in the power sector, according to the agency.

During May, June and July, the United States experienced 800 cumulative cooling degree days (CDD), or 69 (9%) more than the prior 10-year average “and the most CDD for this time period since 2018,” researchers said.

Researchers estimated 36.1 Bcf/d of natural gas power burn for May through July, a 2.1 Bcf/d year/year increase and 3.4 Bcf/d above five-year average levels.

Total domestic storage ended July at 2.5 Tcf, 12% shy of the five-year average, EIA said. That puts inventories on track to exit the injection season near 3.5 Tcf, which would represent a 6% deficit to the five-year average, according to the latest STEO.

U.S. dry natural gas production is set to average 97.1 Bcf/d this month and 96.6 Bcf/d for 2022, which would represent a 3% year/year increase. Production is set to then rise to an average of 100.0 Bcf/d in 2023, according to the agency.

On the demand side, domestic consumption will average 85.2 Bcf/d for 2022 overall, up 3% year/year, the STEO data show.

“Consumption in the electric power sector continues to increase as a result of limited switching from natural gas-fired generators to coal-fired generators for power generation, despite elevated natural gas prices,” researchers said. “In addition, rising U.S. natural gas consumption reflects increased consumption in the residential and commercial sectors as a result of colder temperatures on average in 2022 than in 2021.”

The STEO models a 1.3 Bcf/d (minus 2%) year/year decline in domestic consumption in 2023.

Liquefied natural gas exports are set to average 10.0 Bcf/d for the third quarter and 11.2 Bcf/d for 2022, a 14% increase over year-earlier levels, EIA said.

The latest projections reflect Freeport’s LNG export facility in Texas “resuming operations sooner than we had initially expected,” researchers said. EIA is forecasting U.S. LNG exports to average 12.7 Bcf/d in 2023.