In the ever-dynamic world of global energy, the Short-Term Energy Outlook (STEO) provides valuable insights into recent developments and forecasts. One of the most significant recent announcements is Saudi Arabia’s decision, made on September 5, to extend its voluntary crude oil production cut of 1 million barrels per day (b/d) through the end of the year. This extension, which was set to expire at the end of September, has far-reaching implications for the global oil market.
Global Oil Production
Saudi Arabia’s decision to prolong its voluntary crude oil production cut will continue to impact global oil production and inventory levels. The extension of this production cut is expected to result in a reduction of global oil inventories by 0.2 million b/d in the fourth quarter of 2023 (4Q23). This decision signifies Saudi Arabia’s commitment to stabilizing oil markets and maintaining oil prices at desired levels.
Crude Oil Prices
The Brent crude oil price, a benchmark for global oil markets, is projected to experience fluctuations in the coming months. It is anticipated that the Brent crude oil price will average $93 per barrel (b) during 4Q23, an increase from $86/b in August. This uptick in prices is attributed to the expected decrease in global oil inventories, driven by Saudi Arabia’s continued production cut. However, the price is forecasted to ease to an average of $87/b by the second half of 2024. This decline is primarily based on the expectation that global oil inventories will rise during that period.
U.S. Gasoline Consumption
The U.S. gasoline consumption forecast has undergone revisions due to changes in population estimates by the U.S. Census Bureau. These revisions indicate a shift in the demographic makeup of the United States, with fewer people of working age and more people of retirement age. This demographic shift has a direct impact on driving habits, as retirees tend to drive less.
As a result of these demographic changes, the forecast for U.S. gasoline consumption is expected to average 8.9 million b/d in 2023 and further decrease to 8.7 million b/d in 2024. Notably, the 2024 forecast has been reduced by 0.2 million b/d from the previous August STEO.
Total U.S. Liquid Fuels Consumption
In addition to reduced gasoline consumption, the total U.S. liquid fuels consumption forecast has been adjusted to 20.1 million b/d in 2023, a decrease of 0.3 million b/d from the previous month’s forecast. This adjustment is based on the reclassification of natural gasoline and unfinished oils from product supplied to crude oil supply. These changes aim to more accurately represent the use of these products in the energy landscape. Furthermore, the forecast for 2024 consumption has been lowered by 0.5 million b/d to 20.3 million b/d.
Natural Gas Consumption
U.S. natural gas consumption has seen a noteworthy increase, averaging 80.5 billion cubic feet per day (Bcf/d) in September. This represents a 5% increase compared to the same period in the previous year and sets a record for September. The surge in natural gas consumption can be attributed to several factors, including elevated natural gas-fired electricity generation driven by strong demand for air-conditioning during the summer and reduced generation from coal-fired plants.
Electricity Generation
Electricity generation in the United States is expected to rise by 2% in the third quarter of 2023 (3Q23) compared to the same period in the previous year. This increase is primarily a response to warmer temperatures during the summer, which have driven up demand for cooling. It is important to note that this upturn follows a year-over-year 4% decline in electricity output during the first half of 2023, highlighting the seasonality and variability of electricity generation.
Propane Price
In an effort to provide comprehensive information, the STEO now includes a forecast for the Mont Belvieu propane spot price. While this is not discussed in detail in this summary, it represents an additional aspect of the outlook aimed at providing valuable insights into energy markets.
In conclusion, the Short-Term Energy Outlook offers a detailed overview of global oil production, crude oil prices, U.S. gasoline and liquid fuels consumption, natural gas trends, electricity generation, and propane prices. These insights are vital for policymakers, industry stakeholders, and consumers to navigate the complex and ever-changing landscape of the energy sector, where both global and domestic factors play significant roles in shaping the future of energy markets.