Short-Term Energy Outlook, September 2024 – Peak Oil Barrel

EIA STEO was recently published, the estimate below is based on data from that report and statistics from EIA International Energy Statistics. The EIA expects the 2018 peak for annual average global C+C production to be exceeded in 2025. The monthly peak in November 2018 is also expected to be exceeded in November 2025.

In the chart above world C+C is estimated from the STEO crude oil projection for world minus US, the ratio of crude oil to world minus US C+C is averaged over the most recent 12 months (June 2023 to May 2024) and assumes that it will remain at this level from June 2024 to December 2024. This is a conservative estimate as this ratio has increased over time. The orange line is the 12-month centered average, the purple line represents data from EIA International Statistics, and the red line is the forecast. The previous monthly peak was 84589 kb/d in November 2018, and this is surpassed in November 2025 when World C+C reaches 85099 kb/d. The 12-month centered average (CTMA) was 82958 kb/d in August 2018, the peak post pandemic CTMA was 81867 kb/d in February 2023. For 2023, the CTMA was 81785 kb/d and is expected to decrease to 81664 kb/d in 2024 and then jump to 83938 kb/d in 2025, about 980 kb/d above the previous CTMA peak. Note how fast annual C+C production growth is expected to be from June 2024 to December 2025, over 2700 kb/d over those 19-month periods. The forecast looks optimistic given EIA’s forecasted oil prices and fairly subdued global demand for C+C.

The EIA expects a larger drawdown in global oil inventories compared to last month in 2024, but revised 2025 oil inventories to unchanged from a 100 kb/d drawdown estimated in last month’s report. It’s strange that they expect lower prices in 2024 than forecast last month, when inventory withdrawals increased by 50% from the previous month. The oil price forecast has been revised lower by $2/b in 2025, while inventory levels are expected to be higher than previously forecast. It is not clear how a lower oil price level in 2025 is likely to stimulate higher C+C production above 2700 kb/d. An increase of 750 kb/d seems more reasonable in 2025 and maybe even 500 kb/d for C+C CTMA growth from 2024 to 2025.

The EIA expects growth from the US, Argentina, Brazil, Canada, Guyana and Norway over the forecast period, along with OPEC winding down its cuts after December 2024. I believe that if the EIA’s oil price forecast is correct, it would OPEC increases may not occur. Note that the average Brent Spot price in August was $80.36/b and for the most recent 30 days the average price was around $75/b with the current Brent futures price at $71/b while writing this, if oil prices remain low, there is little incentive to increase oil supply.

There has been an increasing proportion of renewable diesel and biodiesel in the US distillate mix over the past 7 years, and this trend is expected to continue in 2024 and 2025. About 7.5% of distillate consumed in 2023 was non-petroleum and the proportion is to be expected. to increase to 8.8% in 2024.

Natural gas prices are expected to rise in 2025 and Q4 2024, which could help profits in the tight oil sector, although oil prices will also need to return to $75/b for WTI to see higher well completion rates in tight oil. pools.

The high level of natural gas storage relative to the 5-year average is what has driven down natural gas prices, in 2025 natural gas in storage at the end of October is expected to be closer to the 5-year average, which could raise prices. More LNG export facilities are expected to come online in the next 15 months, helping to reduce the natural gas glut in the US.

Based on EIA production and consumption data, world oil inventories have declined since the end of 2023, Brent oil prices averaged $82.74 through September 23, 2024 for this year, and Brent prices had a trend lower since April 2024, it seems likely that the EIM’s consumption estimates are too high or production estimates are too low (or some of both) because prices are not reflecting the drawdown of inventories that the EIA data shows.

The 2024 forecast in the chart above looks reasonable, the 2025 forecast looks 3 to 4 times too high. I doubt we see any increase from OPEC or Eurasia in 2025, very little increase from the US and possibly 500 to 800 kb/d from the big 5 non OPEC+ nations (Argentina, Brazil, Canada, Guyana and Norway) .

Because the chart above for World Consumption in 2024 looks reasonable, but I expect the OECD (including the US) to be flat and China and the Middle East to be similar to 2024. The IEA has a better estimate for 2025 growth of about 1 Mb/day, the EIA estimate is probably 500 kb/day too high for 2025.

OECD inventories are forecast to remain near the bottom of the 5-year range from 2019 to 2023.

Much of the increased electricity generation in the US has come from solar, wind and nuclear power. Natural gas generation also saw significant growth (about 30 of 130 TWh), while coal generation fell by about 10 Twh (the eyeball estimates in the chart).

In the chart above on the right, which shows that power generation is of greater interest than the capacity figures shown on the left side of the chart, by 2025 wind, solar, hydro and nuclear are expected to produce 43% of US electricity generation from 40% in 2023, and the share of electricity generation from natural gas is expected to decline by 3% from 2023 to 2025, and the share of coal by 1% from 2023 to 2025.

Electricity prices rose in 2022 due to high natural gas prices, but price increases are expected to be below the rate of inflation in 2024 and 2025.

STEO’s forecast for the share of US GDP spent on energy is expected to decline to a relatively low level by 2025, lower than in any year except 2020 during the period 2005-2025. Oil prices in particular were very low in 2020 at the height of the pandemic.

Most of the growth in US C+C production for the Lower 48, excluding the GOM, came from the Permian Basin from 2021, this continues over the forecast period. From December 2021 to December 2023, US L48 production without GOM increased at an annual rate of approximately 800 kb/d. From December 2023 to December 2025, STEO forecasts annual growth for US L48 production, excluding GOM C+C, of ​​about 400 kb/d, which seems quite reasonable (possibly 100 kb/d too high).

Most of the growth in US production over the past 2 years has come from tight oil formations in the Permian Basin. I expect the future pace of growth to be considerably slower, especially if oil prices remain below $75/b.