The EIA STEO was published recently, the estimate below is based on data from that report and statistics from the EIA International Energy Statistics. The EIA expects the 2018 peak for annual average World C+C output will be surpassed in 2025. The monthly peak in November 2018 is also expected to be surpassed in November 2025.
In the chart above World C+C is estimated from the STEO crude oil projection for the World minus US, the ratio of crude to C+C for the World minus US is averaged over the most recent 12 months (June 2023 to May 2024) and is assumed to remain at this level over the June 2024 to December 2025 period. This is a conservative estimate because this ratio has been increasing over time. The orange line is the centered 12 month average, the purple line is data from the EIA’s International statistics and the red line is the forecast (which starts in June 2024).
The previous monthly peak was 84589 kb/d in November 2018 and this is surpassed in November 2025 when World C+C reaches 85099 kb/d. The centered 12 month average(CTMA) peak was 82958 kb/d in August 2018, the post pandemic CTMA peak was 81867 kb/d in Feb 2023. For 2023 the CTMA was 81785 kb/d and is expected to fall to 81664 kb/d in 2024 and then jump to 83938 kb/d in 2025, about 980 kb/d above the previous CTMA peak. Note how rapidly C+C output is expected to rise from June 2024 to December 2025, with the annual rate of increase over 2700 kb/d over that 19 month period. The forecast seems optimistic given the projected oil prices by the EIA and rather subdued World demand for C+C.
The EIA expects a larger draw on global oil inventories compared to last month in 2024, but has revised the 2025 oil stocks to unchanged from a 100 kb/d draw expected in last month’s report. It is odd that it expects lower prices in 2024 than forecast last month when it has increased the stock draw by 50% compared to the previous month. The Oil Price forecast has been revised lower by $2/b in 2025 while the stock level is expected to be higher than previously forecast. It is unclear how a an oil price level of only $84/b in 2025 ($2/b less than last month’s estimate) is likely to incentivize higher C+C output of over 2700 kb/d. An increase of 750 kb/d seems more reasonable in 2025, and perhaps as little as 500 kb/d for the C+C CTMA increase from 2024 to 2025.
The EIA is expecting growth from US, Argentina, Brazil, Canada, Guyana, and Norway over the forecast period along with OPEC unwinding its cuts after December 2024. I think if the EIA oil price forecast is correct that OPEC increases might not be forthcoming. Note that the average Brent Spot price in August was $80.36/b and for the most recent 30 days the average price was around $75/b with current Brent futures price at $71/b as I write this, if oil prices remain low there is little incentive to increase the supply of oil.
There has been an increasing proportion of renewable diesel and biodiesel in the US distillate mix over the past 7 years and this trend is expected to continue in 2024 and 2025. About 7.5% of distillate consumed in 2023 was non-petroleum and the proportion is expected to increase to 8.8% in 2024.
Natural gas prices are expected to increase in 2025 and in 2024Q4 which might help profits in the tight oil sector, though oil prices will also need to recover to $75/b for WTI Oil price in order to see higher rates of well completion in tight oil basins.
The high level of natural gas storage relative to the 5 year average is what has been driving natural gas prices lower, in 2025 natural gas in storage at the end of October is expected to be closer to the 5 year average which may increase prices. More LNG export facilities are expected to come online over the next 15 months which will help to reduce the glut of natural gas in the US.
Based on the EIA production and consumption data World petroleum stocks have been decreasing since the end of 2023, Brent oil prices have averaged $82.74 through Sept 23, 2024 for this year and Brent prices have been trending lower since April 2024, it seems likely that the EIA consumption estimates are too high or the production estimates are too low (or some of both), because prices do not reflect the stock draw that the EIA data shows.
The 2024 forecast in the chart above seems reasonable, the 2025 forecast seems 3 to 4 times too high. I doubt we see any increase from OPEC or Eurasia in 2025, very little increase from the US and possibly 500 to 800 kb/d from the Big 5 non OPEC+ nations (Argentina, Brazil, Canada, Guyana, and Norway).
For the chart above for World consumption 2024 looks reasonable, but I expect OECD (including the US) to be flat and China and Middle East to be similar to the 2024 level. The IEA has a better estimate for the increase in 2025 of about 1 Mb/d, the EIA estimate is likely 500 kb/d too high for 2025.
OECD stocks are forecast to remain close to the bottom of the 5 year range from 2019 to 2023.
A large proportion of increased electicity generation in the US came from solar, wind and nuclear power. Natural gas generation also saw a significant increase (about 30 of 130 TWh) while coal generation decreased by about 10 Twh (eyeball estimates from chart).
In the chart above the right side which shows electricity generation is of greater interest than the capacity numbers shown in the left side of the chart, by 2025 wind, solar, hydro, and nuclear are expected to produce 43% of US electric power output, up from 40% in 2023 and the share of natural gas electricity generation is expected to drop by 3% from 2023 to 2025 and the coal share by 1% from 2023 to 2025.
Electricity prices jumped in 2022 due to high natural gas prices, but price increases are expected to be below the rate of inflation in 2024 and 2025.
The STEO forecast for the share of US GDP spent on energy is expected fall to a relatively low level by 2025, lower than any year except 2020 over the 2005 to 2025 period. Prices for oil in particular were very low in 2020 during the height of the pandemic.
Most of the rise in US C+C output for Lower 48 excluding GOM has come from the Permian basin since 2021, this continues during the forecast period. From December 2021 to December 2023 US L48 excl GOM output rose at an annual rate of about 800 kb/d. Over the period from December 2023 to December 2025 the STEO forecasts an annual increase for US L48 excl GOM C+C output of about 400 kb/d which seems fairly reasonable (possibly 100 kb/d too high). Note that the forecast rate of increase over the 2024-2025 period is about half the rate of increase of the previous two years (2022-2023).
Most of the increase in US output for the past 2 years has come from the Permian basin’s tight oil formations. I expect the future rate of growth may be considerably slower (30 to 50% of the annual rate of increase of the previous two years), especially if oil prices remain under $75/b.
Thanks, Dennis,
great post.
A couple of comments.
1. Estimating all-world consumption and production is difficult, so EIA may very well be wrong. However, I reject the notion that oil price is a better arbiter. Oil price movements are multi-factorial and inventory change is only one factor that influences it. Especially over short timescale, crude price has very little correlation with flow balances.
2. On the same topic, these EIA balances are for total liquids, which includes propane, for example. In Q1 propane stocks go down seasonally (heating), while crude stocks don’t. So, for example a Q1 liquids draw would not be expected to affect crude prices, because it mostly reflects propane draws.
3. It’s quite strange that their liquids growth in 2025 matches their crude growth??? NGLs have been growing even faster than crude, so to have ~2.5MMBP crude growth in ‘25 and ZERO NGL growth doesn’t make much sense…