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EIA: US crude oil production up for July
Brent spot averaged $74 per barrel in July; EIA expects 2018 average of $72, dropping to $71 in 2019, with WTI averaging $6 lower
Kristen Nelson Petroleum News
The Brent crude oil spot price averaged $74 per barrel in July, largely unchanged from June, the U.S. Energy Information Administration said Aug. 7 in its Short-Term Energy Outlook.
EIA said it expects Brent to average $72 this year and $71 in 2019, with West Texas Intermediate averaging about $6 per barrel lower than Brent in both years.
“Higher production from OPEC and Russia, compared with the first half of this year, probably put downward pressure on crude oil prices in recent weeks, and we continue to expect Brent crude oil spot prices to fall towards $70 per barrel by the end of 2018, as the market appears to be fairly balanced in the coming months,” Dr. Linda Capuano, EIA administrator, said in an Aug. 7 statement on the forecast.
The agency said crude oil prices declined in July “as several key oil producers increased production from the first half of 2018 and as a major supply disruption (the unplanned supply outage in Libya in July) that many analysts expected to persist for several months was resolved quickly.” Production from several Organization of the Petroleum Exporting Countries and others was expected to be higher for July, compared with the first half of 2018, EIA said. This was offset by threats from Iran to block the Strait of Hormuz, and Saudi Arabia’s halting of shipments through the Bab al-Manedeb strait due to attacks from Yemeni Houthi rebels.
“This increased disruption risk could be contributing to higher price volatility,” the agency said.
“Even though EIA sees oil prices continuing to moderate in the coming months, global oil inventories are below five-year average levels and OPEC spare capacity is low, which could contribute to price volatility and possible price increases if supply disruptions occur,” Capuano said.
Inventories remain slightly below the five-year, 2013-17, average, EIA said, “and any actual outages could cause crude oil prices to increase.”
EIA’s Brent forecasts are $2 higher than the agency’s July forecasts, reflecting lower forecasts for 2019 global oil supply only partially offset by lower forecast demand, the agency said.
US production U.S. crude oil production is estimated to have averaged 10.8 million barrels per day in July, EIA said, up 47,000 bpd from June, with a 2018 average of 10.7 million bpd expected, up from 9.4 million last year, and 2019 production projected to average 11.7 million bpd.
“The August short-term outlook estimates that U.S. crude oil production held steady just under 11 million barrels per day in July. We’re expecting production to rise by about 1 million barrels per day in the coming year, with production almost reaching 12 million by the end of next year,” Capuano said.
Natural gas “With U.S. natural gas production rising to record levels this year, prices will likely be lower than they would be otherwise, against a backdrop of low inventory levels and increased demand from the power sector,” Capuano said.
EIA said it estimates U.S. dry natural gas production was 81.8 billion cubic feet per day in July, up 0.4 bcf from June, and is forecasting production to average 81.1 bcf per day this year, up 7.5 bcf per day from 2017 - “a new record high.” 2019 natural gas production is projected to rise to 84.1 bcf per day.
“Continuing developments in natural gas, including drilling productivity improvements and new infrastructure, factored into EIA’s August forecast for U.S. natural gas production, which we currently expect will exceed 84 billion cubic feet per day for all of 2019,” Capuano said.
Pipeline exports of natural gas averaged 6.7 bcf per day last year, are forecast to average 7 bcf this year and 8.5 bcf in 2019, EIA said. The agency cited increased U.S. natural gas production and completion of new pipelines, with two new pipelines in Mexico placed in service in June that will distribute U.S. natural gas from destinations in Mexico.
Exports of liquefied natural gas, 1.9 bcf per day last year, are forecast at 3 bcf per day this year and 5.1 bcf in 2019, with net U.S. exports of natural gas expected to average 2 bcf in 2018 and 5.4 bcf in 2019, compared with 0.3 bcf in 2017, EIA said.
Henry Hub natural gas spot prices are expected to average $2.96 per million British thermal units this year and $3.10 in 2019.
Financials EIA said first-quarter financials showed that cash flow from 22 U.S. publicly traded oil and natural gas producers with production of natural gas representing at least 60 percent of their output rose to $4 billion in the first quarter, the highest since the third quarter of 2014. Natural gas production for these companies increased 12 percent in the first quarter from a year earlier, resulting in higher upstream revenue and cash flow from operations.
“Throughout 2017 and the first quarter of 2018, natural gas production steadily increased while capital expenditures remained relatively flat,” EIA said.
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