2022 Oil and Gas Outlook
It’s time for our annual look at the forecast for the oil and gas industry for the upcoming year. Here is what the U.S. Energy Information Administration (EIA) and other forecasters are predicting for the remainder of 2022:
EIA Outlook “Subject to Heightened Levels of Uncertainty”
After releasing its initial forecast earlier in the year, the EIA issued a revised short-term outlook in April. In this revised forecast, the EIA begins by stating that the agency’s outlook, “is subject to heightened levels of uncertainty resulting from a variety of factors, including Russia’s further invasion of Ukraine.”
“Bumpy Ride” for the Oil and Gas Industry Likely to Be Even Bumpier Than Expected
While many industry insiders foresaw a “bumpy ride” for the oil and gas industry in 2022, few predicted—or could have predicted—what would transpire in Ukraine at the start of the year. Initially, there was optimism with pandemic restrictions easing and supply coming back into balance. But, with the Biden administration tapping U.S. oil reserves to control gas prices, and with governments around the world taking their own respective hands-on approaches to what could be an impending oil crisis, at this point forecasts around the globe seem to be in a constant state of revision.
The Overall Forecast Remains Positive (But Volatile)
The International Energy Agency (IEA) has also made a downward revision. Notably, however, the IEA still expects to see year-over-year industry growth paired with an overall increase in demand. This is consistent with the current view of the EIA. According to the IEA:
“Surging commodity prices and international sanctions levied against Russia following its invasion of Ukraine are expected to appreciably depress global economic growth. As a result, we have revised down our forecast for world oil demand by 1.3 mb/d for 2Q22-4Q22, resulting in 950 kb/d slower growth for 2022 on average. Total demand is now projected at 99.7 mb/d in 2022, an increase of 2.1 mb/d from 2021.”
Similarly, the EIA writes of its own revised forecast that:
“U.S. crude oil production in the forecast averages 12.0 million b/d in 2022, up 0.8 million b/d from 2021. We forecast production to increase another 0.9 million b/d in 2023 to average almost 13.0 million b/d, surpassing the previous annual average record of 12.3 million b/d set in 2019.”
On the natural gas side, the EIA is currently projecting below-average end-of-year inventories for 2022. However, it expects this to change course next year. Estimating that the Henry Hub price will average $5.23/MMBtu for 2022, the EIA writes that its forecast of $4.01/MMBtu for 2023, “reflects our expectation that storage levels will be higher during 2023 than in 2022.”
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