The U.S. Energy Information Administration (EIA) recently released its Short-Term Energy Outlook (STEO), providing valuable insights into the future of the energy market. This report includes updated forecasts for U.S. crude oil and natural gas production, natural gas prices, and electricity consumption and expenditures. Below, we summarize the key points and trends from the EIA’s June 2024 release.
Crude Oil Production Forecast
U.S. Crude Oil Production: The EIA projects a 2% growth in U.S. crude oil production for 2024, averaging 13.2 million barrels per day (b/d). This upward trend is expected to continue, with a 4% increase projected for 2025, bringing production to 13.7 million b/d. The Permian region leads this growth, contributing almost 50% of the total domestic production, followed by the Eagle Ford region and the Federal Gulf of Mexico.
OPEC+ Crude Oil Production: The EIA has adjusted its forecast for OPEC+ production cuts. Initially expected to begin easing in the third quarter of 2024, these cuts are now anticipated to relax in the fourth quarter. This extension will likely lead to continued reductions in global oil inventories through the first quarter of 2025. As a result, crude oil prices are expected to rise from early June levels, though the forecast for Brent crude oil prices in 2024 has been revised down to $84 per barrel, a 4% decrease from the previous month’s forecast.
Natural Gas Production and Pricing
U.S. Natural Gas Production: The EIA forecasts a 1% decline in U.S. marketed natural gas production for 2024 due to low natural gas prices. The Haynesville region is expected to see a 9% decrease, while the Appalachia region will likely experience a 4% decline. However, the Permian region’s natural gas production is forecasted to grow by 4%, driven largely by associated gas from oil production. A recovery is expected in 2025, with a 2% increase in marketed natural gas production across all three regions.
Natural Gas Prices: The anticipated drop in natural gas production is expected to exert upward pressure on the Henry Hub natural gas spot price. The EIA projects an average price of $2.50 per million British thermal units (MMBtu) for 2024, a 13% increase from last month’s forecast. Prices are expected to rise from $2.12/MMBtu in May to $3.30/MMBtu by December 2024.
Electricity Consumption and Expenditures
Residential Electricity Expenditures: For the summer months of June through August, the EIA forecasts that U.S. residential electricity customers will see an average monthly bill of around $170, similar to last summer. This stability is due to lower electricity prices in most areas offsetting slightly higher electricity consumption, driven by anticipated warmer summer temperatures.
Commercial and Industrial Electricity Consumption: The EIA has revised its forecast for electricity demand in the commercial and industrial sectors slightly upward, reflecting increased power demand from data centers. In the South Atlantic, commercial electricity demand is expected to rise by 5% in 2024 and 2% in 2025. The West South Central region is forecasted to see a 3% increase in commercial sector demand this year and a 1% increase next year.
Conclusion
The EIA’s June 2024 Short-Term Energy Outlook highlights significant trends in U.S. energy production and consumption. The forecasted increases in crude oil and natural gas production, alongside rising natural gas prices and stable electricity expenditures, provide a comprehensive view of the energy landscape. Investors and stakeholders in the energy sector should consider these projections when making strategic decisions.