EIA outlook more uncertain than normal

December 8, 2021

SJ Munoz

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The Energy Information Administration provided an updated fuel forecast with the Dec. 7 release of its short-term energy outlook.

Based upon the report, COVID-19, and more specifically the discovery of the omicron variant, still remains a major factor.

“The December outlook is subject to more uncertainty than normal,” Timothy Hess, EIA’s project manager for short-term energy outlook, said in the report. “It is not yet clear how omicron will affect oil markets and the broader economy.”

Price estimates

Brent crude oil spot prices averaged $81 per barrel in November, which is a decrease of $3 per barrel compared to October. However, that price is $38 per barrel higher than November 2020. EIA correlates this rise in price to steady draws on global oil inventories that averaged 1.4 million barrels per day during the first three quarters of 2021.

Nov. 26 saw a significant drop in prices, and spot pricing began December below $70 per barrel. EIA says the COVID-19 omicron variant has raised the possibility that demand could decline in the near term.

Brent spot prices are forecast to average $73 per barrel in the first quarter of 2022, which is down $5 per barrel from EIA’s previous forecast, Hess said. In addition, diesel prices could drop from $3.73 per gallon in November 2021 to $3.39 by January 2022 based on the outlook.

“That mostly reflects the possibility that oil demand will be lower than we had expected in early 2022 because of the omicron variant of COVID,” Hess said. “We incorporated the announced (Strategic Petroleum Reserve) release into this forecast, and that could also contribute some to lower prices in the coming months compared with our previous forecast.”

Global use

An estimated 99.7 million barrels per day of petroleum and liquid fuels were consumed globally in November, according to the EIA outlook. That was an increase of 4.9 million per day from November 2020, but 1.1 million per day less than November 2019.

As a result, EIA has lowered its forecast for consumption in the fourth quarter of 2021 as well as the first quarter of 2022.

Production on the other hand is expected to increase from 11.7 million barrels per day in November to 12.1 million barrels per day by the end of 2022. LL