Brent crude oil prices are on track to average $104/bbl in 2022, a sharp increase from an average price of $71 for the global benchmark in 2021, updated modeling from the Energy Information Administration (EIA) shows.

The horizon remains clouded by uncertainty surrounding economic activity and the effects of Russia’s invasion of Ukraine, researchers said in EIA’s latest Short-Term Energy Outlook (STEO), published Tuesday.

“The possibility of economic activity being less robust than assumed in our forecast could result in lower-than-forecast energy consumption,” researchers said.

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Questions remain as to the impacts of sanctions on Russia’s oil production. Also sources of uncertainty are the production decisions by OPEC-plus and the rate of U.S. output increases moving forward, according to EIA.

The latest STEO models a 2.4 million b/d increase in OPEC crude oil production this year, to 28.7 million b/d on average. Output from the cartel is then expected to climb to 29.3 million b/d in 2023. OPEC’s output averaged 26.3 million b/d in 2021.

Domestic crude oil production, meanwhile, is forecast to average 11.9 million b/d in 2022 and 12.8 million b/d in 2023, STEO data show. 

On the demand side, global consumption of liquid fuels is on track to increase 2.2 million b/d this year and another 2.0 million b/d in 2023, according to the agency. Global inventories are set to increase 0.8 million b/d this year and hold flat in 2023.

“Inventory builds in 2022 reflect rising production of liquid fuels in the United States and OPEC, paired with slowing liquid fuels consumption growth,” researchers said.

LNG Exports Fall On Freeport

As for the natural gas outlook, U.S. LNG exports are now expected to drop to 10.5 Bcf/d in the second half of this year following the prolonged outage at the Freeport LNG terminal on the Texas coast, the latest STEO data show.

The 10.5 Bcf/d estimate for liquefied natural gas exports in the second half of the year reflects a 14% drop from month-earlier projections. For full-year 2022, EIA expects U.S. LNG exports to average 10.9 Bcf/d before rising to 12.7 Bcf/d in 2023.

The agency’s modeling assumes a return to full service at the 2.0 Bcf/d Freeport terminal by January 2023.

“Strong natural gas demand and high LNG prices in Europe and Asia drove the continued growth in U.S. LNG exports in the first half of this year,” researchers said. “During the first five months of 2022, the United States exported 71% of its LNG to Europe, compared with an annual average of 34% last year.”

Natural gas spot prices at Henry Hub averaged $6.07/MMBtu through the first six months of 2022, according to the latest STEO.

“The average price increased in each month from January through May, when it reached $8.14 before declining to $7.70 in June,” researchers said.

For the latest STEO, EIA modeled an average spot price of $5.97 at the national benchmark for the second half of 2022, with prices expected to average $4.76 for full-year 2023.

Compared with 2021 levels, domestic natural gas consumption is set to increase 2.9 Bcf/d, or 3%, to 85.9 Bcf/d on average this year. Consumption will then ease lower to 85.4 Bcf/d in 2023, EIA projections show.

The share of natural gas in the power stack is on track to hold flat at 37% this year, despite prices for U.S. power generators rising from $4.97 in 2021 to $6.35 in 2022, according to EIA’s forecasting.

“The similar share of natural gas generation despite higher prices results partly from our forecast that electricity generation from coal will decline from 23% of the total in 2021 to 21% in 2022 and 20% in 2023,” researchers said. This “reflects the continued retirement of coal-fired generating capacity and other coal market constraints.”

U.S. dry natural gas production will average 96.2 Bcf/d for full-year 2022, a 2.7 Bcf/d (3%) increase year/year, according to the latest STEO. Production is on track to approach 100.0 Bcf/d on average in 2023, researchers said.