EIA Short-Term Energy Outlook

Release Date: Aug. 10, 2021

Global liquid fuels

The August Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty related to the ongoing recovery from the COVID-19 pandemic. U.S. economic activity continues to rise after reaching multiyear lows in the second quarter of 2020 (2Q20). U.S. gross domestic product (GDP) declined by 3.5% in 2020 from 2019 levels. This STEO assumes U.S. GDP will grow by 6.6% in 2021 and by 5.0% in 2022. The U.S. macroeconomic assumptions in this outlook are based on forecasts by IHS Markit. Our forecast assumes continuing economic growth and increasing mobility. Any developments that would cause deviations from these assumptions would likely cause energy consumption and prices to deviate from our forecast.

Brent crude oil spot prices averaged $75 per barrel (b) in July, up $2/b from June and up $25/b from the end of 2020. Brent prices have been rising this year as result of steady draws on global oil inventories, which averaged 1.8 million barrels per day (b/d) during the first half of 2021 (1H21) and remained at almost 1.4 million b/d in July. We expect Brent prices will remain near current levels for the remainder of 2021, averaging $72/b from August through November. However, in 2022, we expect that continuing growth in production from OPEC+ and accelerating growth in U.S. tight oil production—along with other supply growth—will outpace decelerating growth in global oil consumption and contribute to Brent prices declining to an average of $66/b in 2022.

We estimate that 98.8 million b/d of petroleum and liquid fuels were consumed globally in July, an increase of 6.0 million b/d from July 2020 but 3.4 million b/d less than in July 2019. We forecast that global consumption of petroleum and liquid fuels will average 97.6 million b/d for all of 2021, which is a 5.3 million b/d increase from 2020. We forecast that global consumption of petroleum and liquid fuels will increase by 3.6 million b/d in 2022 to average 101.2 million b/d.

U.S. gasoline consumption averaged 8.6 million b/d in 1H21, up from 8.3 million b/d in 2H20 but below the 9.3 million b/d in 2H19. Our latest estimates show that gasoline consumption in May through July was higher than we had previously expected. Growth in employment and increasing mobility have led to rising gasoline consumption so far in 2021. In this STEO, forecast U.S. gasoline consumption averages 8.8 million b/d in 2021, up from 8.0 million b/d in 2020. We expect the trend of rising employment and mobility to continue into next year, and as a result, we forecast gasoline consumption to average almost 9.0 million b/d in 2022. However, our assumption that a relatively high share of the workforce will continue working from home next year compared with before the pandemic keeps our forecast gasoline consumption below the 2019 level of 9.3 million b/d.

U.S. regular gasoline retail prices averaged $3.14 per gallon (gal) in July, the highest monthly average price since October 2014. Recent gasoline price increases reflect rising crude oil prices and rising wholesale gasoline margins, amid relatively low gasoline inventories. We expect that prices will average $3.12/gal in August before falling to $2.82/gal, on average, in 4Q21. The expected drop in retail gasoline prices reflects our forecast that gasoline margins will decline from elevated levels, as is typical in the United States during the second half of the year.

We forecast OPEC crude oil production will average 26.5 million b/d in 2021, up from 25.6 million b/d in 2020. OPEC crude oil production in the forecast rises from 25.0 million b/d in April to an average of 27.1 million b/d in 3Q21. Our expectation of rising OPEC production is primarily based on our assumption that OPEC will raise production through the end of 2021 in line with targets it announced on July 18. We expect OPEC crude oil production will rise to an average of 28.7 million b/d in 2022.

EIA’s most recent monthly data show U.S. crude oil production was 11.2 million b/d in May. We expect production to be relatively flat through October before it starts rising in November and December and throughout 2022. Forecast U.S. crude oil production for 2022 averages 11.8 million b/d, up from 11.1 million b/d in 2021.

Natural Gas

In July, the natural gas spot price at Henry Hub averaged $3.84 per million British thermal units (MMBtu), which is up from the June average of $3.26/MMBtu. We expect the Henry Hub spot price will average $3.71/MMBtu in 3Q21 and $3.42/MMBtu for all of 2021, which is up from the 2020 average of $2.03/MMBtu. Higher natural gas prices this year primarily reflect two factors: growth in liquefied natural gas (LNG) exports and rising domestic natural gas consumption for sectors other than electric power. In 2022, we expect the Henry Hub price will average $3.08/MMBtu amid rising U.S. natural gas production.

We expect that U.S. consumption of natural gas will average 82.5 billion cubic feet per day (Bcf/d) in 2021, down 1.0% from 2020. U.S. natural gas consumption declines in the forecast, in part, because electric power generators switch to coal from natural gas as a result of rising natural gas prices. In 2021, we expect residential and commercial natural gas consumption combined will rise by 1.2 Bcf/d from 2020 and industrial consumption will rise by 0.2 Bcf/d from 2020. Rising natural gas consumption in sectors other than the electric power results from expanding economic activity and colder winter temperatures in 2021 compared with 2020. We expect U.S. natural gas consumption will average 83.8 Bcf/d in 2022.

We estimate that U.S. natural gas inventories ended July 2021 at almost 2.8 trillion cubic feet (Tcf), which is 6% lower than the five-year (2016–20) average for this time of year. More natural gas was withdrawn from storage during the winter of 2020–21 than the previous five-year average, largely as a result of the colder-than-average February temperatures that constrained natural gas production while it increased consumption. We forecast that inventories will end the 2021 injection season (end of October) at 3.6 Tcf, which would be 4% below the five-year average.

We expect dry natural gas production will average 92.9 Bcf/d in the United States during 2H21—up from 91.4 Bcf/d in 1H21—and then rise to 94.9 Bcf/d in 2022, driven by natural gas and crude oil prices, which we expect to remain at levels that will support enough drilling to sustain production growth.