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EIA expects Brent to average $63 this year
US crude oil production on track for new record levels, country expected to be net exporter of crude, petroleum products, in 2020 Kristen Nelson Petroleum News
Brent crude oil spot prices averaged $64 per barrel in February, the U.S. Energy Information Administration said March 12 in its Short-Term Energy Outlook. That was an increase of $5 from January, and about $1 per barrel lower than the same time last year. Prices averaged $71 per barrel in 2018, EIA said.
EIA is projecting “Brent crude oil prices to average $63 per barrel in 2019, a significant reduction from 2018’s average prices,” EIA Administrator Dr. Linda Capuano said in a statement accompanying the outlook. “Through 2020, the outlook expects the difference between Brent and West Texas Intermediate prices to narrow.”
West Texas Intermediate crude is expected to average $9 per barrel lower than Brent in the first half of the year, before the discount gradually falls to $4 per barrel in the fourth quarter, where it is expected to remain throughout 2020.
The agency is forecasting $62 per barrel for crude in 2020.
US Crude production U.S. crude oil production is estimated to have averaged 11.9 million barrels per day in February, EIA said, down slightly from January.
“This month’s forecast for U.S. crude oil production in 2019 and 2020 decreased, but both years are still on track for new production records. The March forecast expects production to exceed 13 million barrels per day in the third quarter of 2020 for the first time, instead of the second quarter as previously forecast. The change resulted from lower production expectations out of the Gulf of Mexico and the Niobrara and Anadarko shale plays,” Capuano said.
EIA said the U.S. production forecast is 12.3 million bpd this year and 13 million bpd in 2020, with most of the growth in the Permian region of Texas and New Mexico.
Net exports Capuano said the U.S. is expected “to become a net exporter of crude oil and petroleum products in 2020,” with EIA estimating “that the nation will transition from net imports of fewer than 4 million barrels per day in 2017 to net exports of an estimated 100,000 barrels per day in 2020.”
U.S. net imports averaged 3.8 million bpd in 2017, falling to an average of 2.3 million bpd in 2018, EIA said, and are expected to fall to an average of 1 million bpd this year. The agency forecasts that in the fourth quarter of 2020, the U.S. will be a net exporter of crude oil and petroleum products by about 900,000 bpd.
Natural gas The Henry Hub natural gas spot price averaged $2.69 per million British thermal units in February, EIA said, down 42 cents from January.
The agency said it expects strong U.S. natural gas production in 2019 to put downward pressure on prices, with an average Henry Hub spot price of $2.85 per million Btu expected this year, down 30 cents from 2018.
“EIA continues to forecast that U.S. dry natural gas production will achieve record production levels in 2019 and 2020,” Capuano said.
The agency said dry natural gas production in the U.S. is forecast to average 90.7 billion cubic feet per day this year, up 7.4 bcf from 2018, growing to an average of 92 bcf per day in 2020.
Price issues EIA said price increases in February coincided with its estimate that global inventories fell by 1.4 million bpd, “the largest inventory withdrawal for any month since June 2017.”
Estimated crude oil production declined in February both for the Organization of the Petroleum Exporting Countries and for the U.S., contributing to the draws. EIA said U.S. petroleum inventories declined by 17.9 million barrels for the week ending Feb. 22, “the largest one-week decline since 2011.”
The agency said that it is forecasting that global liquid fuels inventories will rise by 200,000 bpd this year and by 400,000 bpd in 2020, with inventory builds in both years lower than those forecast in February, reflecting “lower expected crude oil production in both OPEC and the United States.” EIA said Saudi Arabia cut production by more than expected in February, averaging 10 million bpd, and the agency said it assumes joint OPEC and non-OPEC production cuts will remain in place through the end of the year.
The agency noted that the U.S. active rig count was at a 10-month low of 834 on March 8, “suggesting the rate of U.S. crude oil production growth could slow.” U.S. production has averaged near the 11.9 million bpd mark for the past four months, EIA said, and is still forecast to increase by 1.3 million bpd this year and by 700,000 bpd in 2020.
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