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Vol. 23, No.41 Week of October 14, 2018
Providing coverage of Alaska and northern Canada's oil and gas industry

EIA: new US crude oil production records

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2019 forecast 11.8 million bpd, up almost 300,000 bpd from September; gas to average 82.7 bcf this year, up 1.8 bcf from last month

Kristen Nelson

Petroleum News

The U.S. Energy Information Administration said Oct. 10 in its October Short-Term Energy Outlook that U.S. crude oil production is estimated to have averaged 11.1 million barrels per day in September, up slightly from August, and is forecast to average 10.7 million bpd this year, up from 9.4 million bpd in 2017.

The forecast for 2019 is 11.8 million bpd, almost 300,000 bpd higher than the September forecast, reflecting higher production in July, which revised up the baseline of the forecast, and also reflecting higher forecast prices.

“The United States will set new records in crude oil production this year and in 2019, according to EIA’s October forecast,” EIA Administrator Dr. Linda Capuano said in a statement accompanying the forecast release. “The forecast for production in all of 2019 increased by about 2 percent from last month, due to production exceeding expectations in Texas and North Dakota this summer.”

“OPEC members, along with Russia, increased crude oil production in the third quarter of 2018 and, in doing so, they were able to largely offset production decreases in Venezuela and Iran. OPEC spare capacity, on the other hand, has dropped to levels not seen in about two years,” Capuano said.

Spot prices

Brent crude oil spot prices averaged $79 per barrel in September, EIA said, up $6 per barrel from August. The agency said it expects Brent to average $74 per barrel this year and $75 in 2019, with West Texas Intermediate expected to average about $6 lower than Brent in both years.

Brent is expected to average $81 per barrel in the fourth quarter of the year, $5 higher than forecast in September, EIA said. “This increase reflects recent price movements incorporated into EIA’s forecast, the higher starting point for the forecast, and the possibility that crude oil prices could remain elevated while market participants assess how much crude oil production in Iran will decline in the coming months and the ability of other oil producers to offset lost volumes.”

Iranian sanctions, reactions

EIA said both Brent and WTI reached four-year highs Oct. 3, with prices rising “in anticipation of potentially steep declines in Iranian crude oil production and exports as a result of the reinstitution of U.S. sanctions” beginning Nov. 4. EIA said the trade press is reporting that major oil-importing countries - including Japan, South Korea, China and India - are planning or considering sharp reductions in imports from Iran.

EIA said the amount of crude from Iran available in the global market may be much lower than expected in May when the U.S. said it would exit the Joint Comprehensive Plan of Action and it estimates that crude oil production in Iran has fallen by more than 400,000 bpd per day since May to an average of 3.4 million bpd in September.

Members of the Organization of the Petroleum Exporting Countries, along with Russia, agreed in June to increase oil production to the target set in November 2016, EIA said. In the third quarter OPEC - other than Iran and Venezuela - “increased crude oil production by more than the amount that crude oil production in Iran and Venezuela declined,” EIA said.

The agency said recent price increases indicate concerns about the ability of Saudi Arabia, other OPEC members and Russia, to continue to offset further production declines in Iran and Venezuela.

The increases in OPEC production to offset the declines in Iran and Venezuela “have resulted in declining OPEC space crude oil production capacity,” EIA said, estimating that OPEC spare capacity fell below 1.4 million bpd in September, “the lowest level since December 2016 when global oil inventory levels were much higher.”

Concerns about declines and how much those declines can be offset have caused an increase in the fourth-quarter Brent forecast to $81 per barrel, up from $76 last month, EIA said.

But, despite declines in production from Iran and Venezuela, EIA said it “forecasts global oil supply and demand to be nearly balanced in 2019 contributing to downward oil price pressures.”

Transportation constraints in the Permian basin are expected to be alleviated by the second half of 2019 and U.S. crude oil production, and potentially U.S. crude oil exports, are expected to increase, which could help keep oil prices in the mid-$70 per barrel range, EIA said.

Natural gas

U.S. dry natural gas production is estimated to have averaged 85.1 billion cubic feet per day in September, up 0.6 bcf from August, EIA said, with the 2018 average forecast at 82.7 bcf per day, up 7.9 bcf from 2017 “and establishing a new record high.”

The 82.7 bcf per day estimate for 2018 is 1.8 bcf per day higher than the September forecast, EIA said, reflecting “higher than expected increases in Texas production in July, increasing the baseline of the forecast.”

Natural gas production is expected to continue to rise in 2019 to an average of 87.7 bcf per day, up 3.1 bcf from the September forecast, with the 2019 upward revision “the result of increased expected production in the Haynesville region in response to higher forecast prices, upward revisions to the Permian region in response to higher prices, and expected new pipeline capacity to come online in the second quarter of 2019.”



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