EIA: Brent down, US crude production up
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11 million bpd record last year; new record expected this year; natural gas exports at 9.9 bcf per day last year, forecast to rise
Kristen Nelson Petroleum News
In its latest Short-Term Energy Outlook, issued June 11, the U.S. Energy Information Administration dropped its 2019 forecast for Brent crude oil spot prices to $67 per barrel, down $3 per barrel from its May outlook. EIA is forecasting Brent to remain at that $67 per barrel average in 2020.
“EIA now forecasts that Brent crude oil spot prices will decline from an average of $71 per barrel in 2018 to $67 per barrel in 2019,” EIA Administrator Dr. Linda Capuano said in a statement accompanying the June outlook.
EIA said Brent averaged $71 per barrel in May, largely unchanged from April, and almost $6 per barrel lower than May of 2018. But Brent fell sharply in recent weeks reaching $62 per barrel on June 5. “EIA’s lower 2019 Brent price path reflects rising uncertainty about global oil demand growth,” the agency said.
EIA said U.S. crude oil production was at a record 11 million barrels per day in 2018.
“EIA expects U.S. crude oil production will continue to set new records in 2019 and 2020, culminating with average production of 13.5 million barrels per day by the end of 2020,” Capuano said.
U.S. production is forecast to increase by 1.4 million bpd this year and by 900,000 bpd in 2020. The agency said that while it expects U.S. production growth to slow, the 2019 forecast would be the second largest on record, following the 2018 record growth of 1.6 million bpd, with 2020 forecast growth the fifth-largest growth on record.
Natural gas “U.S. natural gas exports are on pace to set new records over the next few years as additional export facilities and infrastructure come online. EIA forecasts that U.S. natural gas exports will reach almost 18 billion cubic feet per day by the end of 2020. By comparison, the United States exported roughly 9.9 billion cubic feet per day on average in 2018,” Capuano said.
The agency said the increase in exports reflects increases in new liquefied natural gas facilities and an expected increase in pipeline exports to Mexico.
U.S. dry natural gas production is forecast to average 90.6 bcf per day this year, up 7.2 bcf from 2018, and expected to grow in 2020 to an average of 91.8 bcf per day, EIA said, with another record high for production in May.
The Henry Hub natural gas spot price averaged $2.64 per million British thermal units in May, almost unchanged from April, and EIA said it expects strong growth in U.S. natural gas production to put downward pressure on prices this year, with an average of $2.77 per million Btu forecast, down 38 cents from 2018. That same $2.77 per million Btu price is forecast for 2020.
Oil price volatility “Crude oil price volatility increased in May after declining for four consecutive months and stayed at elevated levels into the first week of June,” EIA said, citing demand-side concerns as contributing to volatility and price declines.
China and the U.S. issued tariffs on each other and potential tariffs on Mexico were announced near the end of May.
In addition, the agency said, expected industrial activity measured by the manufacturing Purchasing Managers’ Index declined in May across several countries, “and the U.S. manufacturing PMI fell to its lowest level since 2009. These developments are contributing to concerns that economic growth could be lower than market participants’ expectations, which would cause oil demand growth to also be lower than expected,” EIA said.
The agency said the lowering of its Brent spot oil price forecast “largely reflects recent global crude oil price declines as well as the uncertainty about global oil demand growth,” which EIA said it expects to grow by 1.2 million bpd this year, down 200,000 bpd from the May forecast.
The Brent to West Texas Intermediate price spread is widening, EIA said, with the futures spread at $8.94 per barrel June 6, up 45 cents since May 1.
Logistics problems in the U.S. Midwest caused by flooding resulted in the temporary closure of some pipelines out of Cushing, Oklahoma, and likely contributed to crude oil stocks in Cushing building by 4.8 million barrels during May, EIA said, noting that Cushing typically sees a draw of 2.1 million barrels during that period.
EIA said its estimates show that U.S. crude oil inventories grew by 15.7 million barrels in May, when a five-year average for the month shows an average draw of 2.1 million barrels.
“If confirmed in monthly data, this year’s stock build would be the largest for the month of May since 1991,” the agency said.
Global crude production Globally, oil production declined in Venezuela and Iran.
Members of the Organization of the Petroleum Exporting Countries averaged only 29.9 million bpd in May, EIA said, “the lowest for any month since July 2014,” partly due to Saudi Arabia producing less than the amounts agreed to in December.
There were also production shut-ins in Russia related to contamination of the Druzhba crude oil pipeline, compounded by planned maintenance on North Sea crude oil platforms.
Some Druzhba pipeline flows had resumed but other refineries were still waiting on crude from the line. EIA said contaminated crude oil would have to be removed from the line so other flows could occur, and the contaminated crude would need to be stored for several months and then gradually blended with clean crude before the oil could be refined.
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