Oil is already in a bear market in 2020, and the prospects for “black gold” have been bleak. While West Texas Intermediate (WTI) was back above $50.00 a barrel on Tuesday, the price has been under $50 for part of the past week. That’s after trading at $62 to $65 per barrel as recently as January 7. According to the U.S. Energy Information Administration (EIA), things may be getting worse for the price of oil before they get better.

The latest EIA short-term energy outlook projects that global petroleum and liquid fuels demand will average 100.3 million barrels per day during the first quarter of 2020. That forecast is 900,000 barrels per day lower than the EIA’s short-term forecast issued just a month earlier. The EIA cited the ongoing and growing effects of the coronavirus and also blamed warmer than normal January temperatures that have been seen over much of the northern hemisphere.

Also seen in the report, the EIA short-term energy outlook now forecasts that global petroleum and liquid fuels demand will rise by 1.0 million barrels per day in 2020. Its prior forecast called for a gain of 1.3 million barrels per day in 2020 and by 1.5 million barrels per day in 2021.

After averaging $65.06 per barrel in 2018 and $57.02 per barrel in 2019, the price of oil is now forecast to average $55.71 in 2020 and $62.03 in 2021. The price of gasoline at the pump was $2.60 on average in 2019, and that price per gallon is expected to be $2.53 in 2020 and $2.63 in 2021.

Certain assumptions are already factored into the outlook that could change the outcome if there are other developments. The first assumption was that the OPEC cartel will lower its own crude oil production by 500,000 barrels per day in March through May due to lower-than-expected global oil demand, and that is on top of the OPEC production cuts that were just announced at the December 2019 meeting. The EIA forecast for OPEC crude oil production is now 28.9 million barrels per day on average for all of 2020, about 300,000 barrels per day lower than the forecast made a month earlier.

The EIA’s lower OPEC production forecast also reflects ongoing crude oil production outages in Libya over the first quarter of this year. It also assumes that OPEC will limit production for all of 2020 and 2021, as the oil markets are considered “relatively balanced.”

The natural gas price forecast from the EIA now looks weak in 2020 with only a slight improvement for 2021. The short-term outlook for February said:

In January, the Henry Hub natural gas spot price averaged $2.02 per million British thermal units (MMBtu), as warm weather contributed to below-average inventory withdrawals and put downward pressure on natural gas prices. As of February 6, the Henry Hub spot price had fallen to $1.86/MMBtu, and EIA expects prices will remain below $2.00/MMBtu in February and March. EIA forecasts that prices will rise in the second quarter of 2020, as U.S. natural gas production declines and natural gas use for power generation increases the demand for gas. EIA expects prices to average $2.36/MMBtu in the third quarter of 2020. EIA forecasts that Henry Hub natural gas spot prices will average $2.21/MMBtu in 2020. EIA expects that natural gas prices will then increase in 2021, reaching an annual average of $2.53/MMBtu.

EIA forecasts have to change significantly to make any serious impacts on the markets, but this is not going to be viewed as the most bullish scenario for companies tied to production and services on all fronts in the oil and gas sector.

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