Brent crude oil prices are set to average $75/bbl in 2022, up from $71 in 2021, as the world is on track to increase its consumption of liquid fuels over the next two years, according to updated projections from the Energy Information Administration (EIA).

The world consumed 96.9 million b/d on average in 2021, a 5.0 million b/d year/year increase following the impacts of the Covid-19 pandemic in 2020, EIA said in its latest Short-Term Energy Outlook (STEO), published Tuesday. Consumption is poised to grow 3.6 million b/d this year and another 1.8 million b/d in 2023, the agency said.

While Brent prices are expected to rise in 2022, researchers said they expect the global crude benchmark to soften to $68 in 2023.

Production and inventories both rise in the latest STEO projections. Global liquid fuels inventories declined by 1.4 million b/d on average in 2021, but stocks are projected to climb by 0.5 million b/d this year and by 0.6 million b/d in 2023, EIA said.

The Organization of the Petroleum Exporting Countries and its allies, aka OPEC-plus, is expected to raise output by 2.5 million b/d this year to 28.8 million b/d on average in the latest forecast. Output is expected to then inch higher to 28.9 million b/d in 2023.

U.S. crude production is to average 11.8 million b/d in 2022 and 12.4 million b/d in 2023, up from 11.2 million b/d in 2021, according to EIA. If realized, the 2023 production clip would set a new record for annual average domestic crude production, the agency said. The current record was set in 2019, when output averaged 12.3 million b/d.

NatGas Production to Rise

As for natural gas projections out to 2023, EIA in its latest STEO laid out a vision of rising natural gas production and exports alongside moderating U.S. prices.

Natural gas spot prices at Henry Hub averaged $3.91/MMBtu for 2021, the agency said. This year and next should bring slightly lower pricing for the national benchmark, with a forecast average price of $3.79 for 2022 and $3.63 for 2023, the agency said.

U.S. liquefied natural gas (LNG) exports rose more than 3 Bcf/d versus 2020 levels to average 9.8 Bcf/d in 2021, and export growth is set to continue in the new year, according to the latest STEO. EIA projected 11.5 Bcf/d of LNG exports on average for 2022, with that figure expected to rise to 12.1 Bcf/d in 2023.

Domestic dry natural gas production is also set to rise this year and next after growing 2.0 Bcf/d year/year to 93.5 Bcf/d on average in 2021. For full-year 2022, EIA forecast 96.0 Bcf/d of production on average; output would then climb to 97.6 Bcf/d next year.

Dampened Demand

U.S. natural gas prices fell sharply in late 2021 as mild weather dampened demand expectations. EIA calculated 612 heating degree days for the December overall, off 122 from the 10-year average.

The milder temperatures resulted in a lighter-than-average draw on U.S. storage inventories in late 2021, allowing stockpiles to eclipse the five-year average. December brought a net 338 Bcf withdrawal, 200 Bcf lighter than the prior five-year average, according to EIA.

In the latest STEO, EIA projected an end-March 2022 storage carryout of 1.8 Tcf, which would come in 8% higher than the 2017-2021 average.

Natural gas saw its share of U.S. electric generation average 37% for 2021, but that figure is expected to decline over the next two years, to 35% in 2022 and 34% in 2023, according to EIA.

Decreasing Natural Gas Generation

“Our forecast for the natural gas share as a generation fuel declines primarily as a result of increased generation from new renewable energy generating capacity,” researchers said. “Coal’s average generation share rose to 23% in 2021 as a result of higher natural gas prices, but we expect it to decline slightly over the next two years, averaging near 22% in 2022 and 2023.”

Energy-related carbon dioxide (CO2) emissions rose 6.2% in 2021 amid economic recovery from the impacts of the Covid-19 pandemic, EIA said. Emissions are expected to grow 1.8% in 2022 and another 0.5% in 2023.

“Even with growth over the next two years, forecast CO2 emissions in 2023 are 3.4% lower than 2019 levels,” researchers said.