Energy Prospectus

Each month EIA publishes the STEO report with updated forecasts.

From the report with my comments in blue.

> EIA forecasts that global liquid fuels consumption will increase by 0.9 million barrels per day (b/d) in 2019, down from year-over-year growth of 1.3 million b/d in 2018. The slowing liquid fuels demand growth reflects EIA’s assumption (based on forecasts from Oxford Economics) of decelerating growth in global oil-weighted gross domestic product (GDP). EIA expects that global liquid fuels demand will increase by 1.4 million b/d in 2020 as a result of an expected increase in global GDP growth.

> EIA forecasts U.S. crude oil production will average 12.2 million b/d in 2019, up by 1.2 million from the 2018 level. Forecast crude oil production then rises by 1.0 million b/d in 2020 to an annual average of 13.2 million b/d. The slowing rate of crude oil production growth reflects relatively flat crude oil price levels and slowing growth in well-level productivity. < Year over year oil production growth in the U.S. is up only because we started from a high level. Daily production of oil in the first seven months of 2019 was lower than December, 2018 oil production.

MY TAKE: EIA's forecast of a 1.0 million barrel per day increase in U.S. oil production will NOT HAPPEN at today's active rig count. The only way the active rig count goes up is if the price of oil moves UP to the "Right Price" of $65 to $75 for WTI and stays there for an extended period of time. Also, keep in mind that IMO 2020 regulations will have a significant impact on demand in just a few months.

Read summary of the STEO report here: https://www.eia.gov/outlooks/steo/

KEEP in mind that EIA's production forecast in their January STEO report was MUCH HIGHER than it is today. EIA and IEA have a long history of under-estimating global demand for oil.

Bloomberg at 7:00AM ET on Sept 11 -- Oil advanced to highest level since July after the head of OPEC said that the group had been “very conservative” with its oil demand estimates and that there was no global recession on the horizon.

Futures rose as much as 1.6% in New York on Tuesday, gaining for the fifth consecutive day. At a speech at the the World Energy Congress in Abu Dhabi, OPEC Secretary-General Mohammad Barkindo said the cartel had been conservative with its oil demand estimates. Investors were also keeping an eye on the upcoming weekly inventory report which is forecast to show U.S. crude supplies contracted by 2.9 million barrels.

Crude is still down more than 10% from its peak in April as a prolonged U.S.-China trade war dents the demand outlook. Nevertheless, this Thursday’s meeting of the OPEC+ Joint Ministerial Monitoring Committee in Abu Dhabi, as well as Saudi Energy Minister Prince Abdulaziz bin Salman‘s commitment to maintain Saudi policy, are keeping the market focused on production curbs.

“The focus is going to be on the macro oil picture; it is going to be on the JMMC meeting,” said Olivier Jakob, managing director of consultant Petromatrix GmbH. “The new Saudi energy minister has not said anything that deviates from the previous policy.”

West Texas Intermediate oil for October delivery increased 62 cents to $58.47 a barrel on the New York Mercantile Exchange as of 11:14 a.m. New York time.

Brent for November settlement rose 96 cents to $63.55 a barrel on the ICE (NYSE:ICE) Futures Europe Exchange. The global benchmark oil traded at a $5.13 premium to WTI for the same month.

“There is nothing radical in Saudi Arabia; we all work for the government, one person comes, one person goes,” Prince Abdulaziz said at the World Energy Congress in Abu Dhabi on Monday, his first public comments since he was appointed. Saudi Arabia has shouldered the bulk of OPEC+ production cuts, and is pumping about 500,000 barrels a day less than its agreed cap.

See also: Saudi Arabia’s New Prince of Oil Is Lifelong Energy Insider

This week sees the publication of three key monthly market reports. The U.S. Department of Energy will publish its Short-Term Energy Outlook later on Tuesday, while the Organization of Petroleum Exporting Countries will release its report on Wednesday and the International Energy Agency’s review is due Thursday.