EIA Short Term Energy Outlook - January 2025

[dan_s]

Notes below from the EIA monthly STEO Report with my comments in blue.

Global oil prices.
We expect downward oil price pressures over much of the next two years, as we expect that global oil production will grow more than global oil demand. We forecast that the Brent crude oil price will average $74 per barrel (b) in 2025, 8% less than in 2024, and then continue fall another 11% to $66/b in 2026. < Demand for oil-based transportation fuels increases by ~2 million bpd from Q1 to Q2 each year. Brent is over $79/bbl today and I expect it to average $80/bbl this year. If Team Trump puts maximum pressure on Iran, we could see Brent go over $90/bbl. A lot depends on what Saudi Arabia does.

Global oil production.
The unwinding of OPEC+ production cuts and strong growth in oil production outside of OPEC+ results in global oil production growing in our forecast. We expect global production of liquid fuels will increase by 1.8 million barrels per day (b/d) in 2025 and 1.5 million b/d in 2026. Although we forecast OPEC+ will increase production, we expect the group will produce less crude oil than stated in its most recent production target in an effort to avoid significant inventory builds. This forecast was completed before the United States issued additional sanctions targeting Russia’s oil sector on January 10, which have the potential to reduce Russia’s oil exports to the global market.

U.S. crude oil production.
After reaching an annual record of 13.2 million b/d in 2024, we forecast U.S. crude oil production will increase to 13.5 million b/d this year. We expect crude oil production to grow less than 1% in 2026, averaging 13.6 million b/d as operators slow activity due to price pressures. WTI prices average $62 per barrel in 2026 in our forecast, down from $70 per barrel in 2025. The Permian region’s share of U.S. production will continue to increase, accounting for more than 50% of all U.S. crude oil production in 2026. The expected production growth in the Permian in 2026 will be offset by contraction in other regions. < It is my opinion that crude oil production will soon peak in the Permian Basin as the gas-to-oil ratio continues to increase. Since natural gas flaring is banned, and there is limited ngas pipeline access, well completions cannot increase much year-over-year no matter how much Trump wants U.S. upstream companies to Drill Baby Drill. Without oil production growth in the Permian Basin, U.S. oil production cannot grow.

Global oil consumption.
Global oil consumption growth in our forecast continues to be less than the pre-pandemic trend. We expect global consumption of liquid fuels to increase by 1.3 million b/d in 2025 and 1.1 million b/d in 2026, driven by consumption growth in non-OECD countries. Much of our expected growth is in Asia, where India is now the leading source of global oil demand growth in our forecast. < A reminder that, other than a significant global recession, nothing will reduce consumption of oil & gas. With crude oil production likely to peak this decade, it would be best to focus on how to move toward more vehicles that can run on compressed or liquefied natural gas. BTW this is #4 on my list of things that should make U.S. natural gas prices go much higher over the next few years.

Natural gas prices.
The Henry Hub spot price generally rises over the next two years in our forecast. We expect the spot price of natural gas at Henry Hub to average $3.10 per million British thermal units (MMBtu) in 2025 and $4.00/MMBtu in 2026, up from an historically low average of around $2.20/MMBtu in 2024. We expect wholesale natural gas prices to increase because growth in demand—led by liquefied natural gas exports—outpaces production growth and keeps inventories during the next two years at or below their previous five-year averages during most of the forecast period. < It just took one Polar Vortex to change this. < My updated forecasts are now based on U.S. natural gas averaging $3.70 in 2025. I am using $4.00 in my 2026 forecasts, but I expect a significant Bidding War this summer that will send the 2026 futures prices over $5.00 in Q3 2025.

Electricity consumption.
After almost two decades of relatively little change, consumption of electricity grew by 2% in the United States during 2024, and we forecast it will continue growing at that rate in 2025 and 2026. If electricity consumption grows in each of the next two years, it would mark the first three years of consecutive growth since 2005–07, though this result could be affected significantly by weather. The growth in electricity consumption in our forecast is mostly the result of growing power demand in the commercial and industrial sectors.

Electricity generation.
Solar power supplies most of the increase in U.S. generation in our forecast. We expect to see the addition of 26 gigawatts (GW) of new solar capacity in the U.S. electric power sector during 2025 and 22 GW in 2026. We expect these capacity additions will support the increase of U.S. solar generation by 34% in 2025 and by 17% in 2026. Rising generation from total renewables will cause natural gas generation to decline by 3% in 2025 and by another 1% in 2026. Generation from coal-fired power plants falls by 1% in 2025 and then rises slightly in 2026, as coal generators become more competitive with natural gas generators, which are expected to face rising fuel costs. < I think we will see a BIG increase in natural gas fired power plants. Demand from AI data centers is just part of the reason. Just in Texas, we need several large natural gas powered plants near large cities to avoid brown outs during peak demand periods in the summer months. AI data centers will need their own dedicated NGas fired power plants.
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The U.S. is BLESSED to have abundant natural gas reserves. Natural gas will be the most significant part of Trump's Common Sense energy plan. Windmills are total BS and solar is a close second.

[mrbill]

Don't forget Landfills for natgas. High school buddy owns one near New Orleans and is in the press showing
how his company is drllling down like a gas well and getting natgas back very economically. Water too, but that's a story for another day.