Brent drops $16 from October to November
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EIA reduces price forecast; US crude oil production up; 2018 average of nearly 11 million bpd expected, making US largest producer
Kristen Nelson Petroleum News
Crude oil production was up and oil prices were down in November, the U.S. Energy Information Administration said in its December Short-Term Energy Outlook, released Dec. 11.
“The December outlook reports that U.S. crude oil production increased between October and November, following the resumption of operations affected by recent hurricanes,” EIA Administrator Dr. Linda Capuano said. “EIA now forecasts U.S. crude oil production will average nearly 11 million barrels per day in 2018, and the United States will conclude 2018 as the world’s largest producer of crude oil,” she said.
EIA said U.S. crude oil production is estimated to have averaged 11.5 million barrels per day in November, up 150,000 bpd from October. U.S. production is expected to average 10.9 million bpd this year, up from 9.4 million bpd in 2017, and to average 12.1 million bpd in 2019.
Brent crude oil spot prices averaged $65 per barrel in November, EIA said, down $16 from October and the largest monthly average price decline since December 2014.
Forecast changes Capuano said the December forecast “specifically revises downward last month’s forecast for crude oil spot prices. EIA now expects the spot price for Brent to average $61 per barrel in 2019. Market uncertainty during November appears to have contributed to levels of price volatility for Brent and West Texas Intermediate crude oils not seen in several years,” she said, with the recent decline in Brent largely attributable “to record production among the world’s largest crude oil producers and concerns about weaker global oil demand.”
The agency said WTI prices had three “rare and large price declines” over 10 days in mid-November, with WTI prices down by more than 33 percent from a four-year high in early October.
EIA said it is now forecasting that Brent and West Texas Intermediate crude oil spot prices will average $61 and $54 per barrel, respectively, next year - forecasts $11 lower than the agency forecast in November.
Crude oil prices declined significantly in November, the agency said, but increased the first week in December “amid heightened price volatility.” EIA said that while it had been forecasting downward price pressures, the price drop was faster and the magnitude greater than expected. “Prices have likely declined to a level that EIA believes will contribute to a roughly balanced market in 2019, which EIA expects will keep prices close to current levels on average,” the agency said.
The Organization of the Petroleum Exporting Countries and several non-OPEC nations said Dec. 7 that they would reduce production by 1.2 million bpd from October levels for the first six months of 2019. EIA said this was in response to increasing evidence that oil markets could become oversupplied next year.
Natural gas EIA said the Henry Hub natural gas spot price averaged $4.15 per million British thermal units in November, up 87 cents per million Btu from October.
“The December outlook continues to forecast new record U.S. annual natural gas production in both 2018 and 2018,” Capuano said, “which will likely put downward pressure on prices in 2019.” She said U.S. natural gas prices increased in November in response to inventory levels and cold weather.
The agency said it expects strong growth in U.S. natural gas production to put downward pressure on prices, which are forecast to average $3.11 per million Btu next year, down 6 cents from the 2018 average and down from a forecast average price of $3.88 in the fourth quarter.
U.S. dry natural gas production is projected to average 83.3 billion cubic feet per day this year, up 8.5 bcf from 2017.
“Both the level and volume growth of natural gas production in 2018 would establish new records,” EIA said. The agency expects production to continue to rise next year to an average of 90 bcf per day.
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