The global energy horizon continues to evolve, assuming in the process, new shapes and forms!

Only last year, on February 9, to be exact, the US Energy Information Agency (EIA) — the statistical arm of the US Department of Energy (DoE) — had forecasted in its Annual Energy Outlook 2018 that the US would become a net energy exporter by 2022.

A year later, while unveiling its Energy Outlook 2019 (AEO 2019) last Thursday, at the Bipartisan Policy Centre in Washington, EIA Administrator Dr Linda Capuano forecasted the country would become a net exporter even earlier, in 2020 and not 2022 as was earlier said. The long-held dream of achieving energy independence is thus on the way to be fulfilled.

The AEO 2019 re-emphasised that the US will start exporting more crude oil and petroleum products than it imports by the final quarter of 2020.

In 2017, the EIA had forecasted that the nation would achieve the status of net energy exporter in 2026 only. Over the last two years, the time period has been shortened by six years. And, after 2020, the AEO-2019 insists the US would continue to be a net oil exporter for decades.

With the US oil production, already at an all-time high, and forecasted to increase by another 2 million barrels per day (bpd) by next year, the country was set to transition into a net exporter of crude oil and fuel — for the first time in almost seven decades.

Last year, net imports of oil and petroleum products into the US fell from 3.8mbpd to 2.4mbpd.

EIA forecasts US net imports will dwindle further to 1.1mbpd next year and just 100,000bpd in 2020.

In the final three months of 2020, EIA thinks the US will become a net exporter by about 900,000bpd.

As per the EIA, American drillers pumped an average 10.9mbpd in 2018, breaking the record going back to 1970. EIA now sees US output averaging 12.1mbpd this year and 12.9mbpd in 2020, making the country, less and less reliant on imported crude.

And it is not just the EIA that is painting this picture. Others are even more optimistic. In Rystad Energy’s base case oil price scenario, US liquids production is forecasted to surpass 24mbpd by 2025, outpacing the combined output from Russia and Saudi Arabia.

“The United States, having regained its position as the world’s top liquids producer in 2014, is poised to accelerate into a league of its own over the next six years and eclipse the collective output of its two closest rivals by 2025,” Rystad Energy partner Artem Abramov was quoted as saying.

“US growth potential could be slowed if oil prices slide below our base case for extended periods but, as long as average prices stay above $50, positive US production tendencies will persist,” Abramov added.

While making the projection, Rystad Energy, the independent, Norwegian energy research and consulting firm, assumed an average WTI Cushing oil price of $58 per barrel during the six-year, 2019 to 2025, period.

This scenario is having implications. Saudi Arabia and its allies both within and outside the Opec have begun implementing output cuts, as was agreed upon.

Saudi Arabia, the Opec kingpin, is making good on vows to cut its output. Saudi exports in December fell by about half a million bpd to stand at 7.253mbpd, the tanker-tracking data from Bloomberg reported.

Yet, crude markets continue to stay soft.

Markets are apparently aware of the emerging trends and are taking cognizance of the growing pressure on the global energy balance. The spreading gloom on the global economic horizon, the declining industrial output in China, the trade war between Washington and Beijing, all are impacting the crude market psyche. And to top it all, the growing imbalance between demand and supply continues to make crude markets soft.

It is said, and rightly so, crude markets are often governed by psychology and the pressure on the global energy balance — from supply side — continues to impact the market psyche in a rather ­negative way.

With the US in lead as far as output is concerned, and barring spikes here and there, the gloom in crude markets does not seem to dissipate, anytime soon.

Published in Dawn, January 27th, 2019