|
US crude production continues record rate
EIA says Brent averaged $64 in June, down $7 from May, down $10 from June 2018; Henry Hub forecast to average $2.50 per million Btu Kristen Nelson Petroleum News
Brent crude oil spot prices averaged $64 per barrel in June, down $7 from May and down $10 from June 2018, the U.S. Energy Information Administration said in its July Short-Term Energy Outlook, released July 10. The agency said it expects Brent to average $67 per barrel in the second half of 2019 and to remain at that level in 2020. Brent averaged $71 in April and May.
“The recent price declines largely reflect increasing uncertainty about global oil demand growth as a result of increasingly weak global economic signals,” EIA said. Upward pressure on prices has been limited by weakening oil demand and strong supply growth in the U.S., the agency said, factors which have outweighed decreasing supply in Venezuela and Iran, extension of the OPEC-plus production limitation agreement through the first quarter of next year and Saudi Arabia’s continued over-compliance with the existing agreements.
EIA said it expects markets to be relatively balanced in the second half of the year and is forecasting Brent crude to remain near current levels, averaging $67 from July through December.
Factors which could cause crude prices to vary significantly from annual average forecasts include global economic developments, geopolitical events, adherence to the OPEC-plus targets, events in Venezuela and Libya and any disruptions in transportation, EIA said.
The agency noted that “the U.S. tight oil sector continues to be dynamic, and quickly evolving trends in this sector could affect both current crude oil prices and expectations for future prices.”
West Texas Intermediate are forecast to average $62 per barrel in the second half of the year and $63 in 2020.
Natural gas The forecast for natural gas prices is down from EIA’s June short-term outlook.
“EIA expects that natural gas prices at Henry Hub will average $2.35 per million British thermal units through September, down quite a bit from our previous forecast,” EIA Administrator Dr. Linda Capuano said in a statement accompanying the outlook. “EIA lowered the forecast after mild June temperatures reduced gas power burn, contributing to several weeks of plus-100 billion cubic feet storage injections. EIA is also seeing continuing efficiencies in drilling technology that reduce the cost of natural gas production and contribute to a lower price environment,” she said.
US crude oil “EIA continues to expect record U.S. crude oil production in 2019 and again in 2020, due in large part to significant development in the Permian basin in Texas and New Mexico. The July forecast expects U.S. production to exceed an average of 13 million barrels per day in 2020,” Capuano said.
U.S. crude oil production reached a record-high 11 million bpd in 2018 and is expected to average 12.4 million bpd this year and 13.3 million bpd in 2020, the agency said.
“If the domestic and global forecasts are realized, the United States would maintain its status as the world’s leading crude oil producer in both years,” EIA said.
The U.S. is increasing oil production from tight oil formations in the Permian region of Texas and New Mexico, which accounts for almost 1 million bpd of the increased production expected in 2019 and 700,000 bpd of the 2020 increase. The agency said it expects the remaining growth to come from the Bakken, Niobrara, Anadarko and Eagle Ford regions, with the federal Gulf of Mexico accounting for 200,000 bpd of growth in 2019 and 100,000 bpd in 2020.
Production from the Permian is expected to average 5.4 million bpd by the end of 2020. “Favorable geology combined with technological and operational improvements have been responsible for making the Permian one of the most prolific regions of U.S. crude oil production,” expected to average 4.4 million bpd this year and 5.1 million bpd in 2020, EIA said.
2018 pipeline constraints in the Permian have been partially alleviated by the Sunrise and Seminole pipelines, constructed in the first half of the year. EIA said a downside risk in the Permian is increased production of associated natural gas. “If natural gas pipeline constraints are not eased and tighter limits are put in place on flaring natural gas, drilling in areas with high concentrations of natural gas in the Permian region might be reduced,” the agency said.
The Eagle Ford is forecast to rise by 57,000 bpd from 2018 levels to 1.4 million bpd and then grow by another 34,000 bpd in 2020. EIA said the Eagle Ford is significantly smaller than the Permian, with fewer opportunities to drill.
In the Bakken, production for 2018 is estimated to have been 1.3 million bpd and is forecast to grow by 130,000 bpd this year and by 50,000 bpd in 2020. New pipeline projects out of North Dakota will further reduce pipeline constraints, but the area has a downside risk in that drilling is more susceptible to cold weather and lower crude oil prices.
In the federal Gulf of Mexico, expected to average 1.9 million bpd this year and 2 million bpd in 2020, 14 new projects came online in 2018, nine more projects are expected to come online this year and three more in 2020.
| 