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EIA: Brent crude spot price peaks in June Combined US, Canada liquids production projected to grow by 1.6 million bpd in 2014, majority of non-OPEC increase of 1.7 million bpd Kristen Nelson Petroleum News
North Sea Brent crude oil spot prices peaked for the year at more than $115 per barrel June 19, the U.S. Energy Information Administration said July 8 in its June Short-Term Energy Outlook.
EIA attributed the spike primarily to upward price pressures due to unrest in Iraq.
The North Sea Brent spot price averaged $112 per barrel in June, up from $110 per barrel in May. June was the 12th consecutive month in which the Brent average was between $107 and $112 per barrel, the agency said.
Brent is projected to average $110 per barrel this year and $105 per barrel in 2015, up $2 and $3 per barrel, respectively, from EIA’s May projection.
The West Texas Intermediate discount to Brent is projected to average $9 per barrel in 2014 and $10 per barrel in 2015.
In addition to conflict in Iraq, EIA said record-high levels of Chinese crude oil imports and ongoing delays in Libyan oil exports also contributed to upward price pressure.
The WTI spot price averaged $106 per barrel in June, up from $102 per barrel in May, driven partly by “relocation of crude oil to refining centers along the Gulf Coast through new pipelines,” EIA said. Crude inventory levels at Cushing, Oklahoma, the delivery point for WTI, “have fallen by more than half since the start of the year, from 42 million barrels on January 24 to below 21 million barrels on June 27, the lowest level since November 2008,” EIA said.
The discount of WTI to Brent averaged more than $13 per barrel from November through January, and fell to $6 in June.
EIA said the U.S. Commerce Department’s Bureau of Industry and Security has authorized two companies to export “stabilized lease condensate processed in a distillation tower.”
US crude production up EIA said U.S. crude oil production is expected to average 8.5 million bpd this year and 9.3 million bpd in 2015, up from 7.4 million bpd in 2013. “The 2015 forecast represents the highest annual average level of oil production since 1972,” EIA said.
Natural gas plant liquids production is expected to increase to 3 million bpd in 2015, up from 2.6 million bpd in 2013.
Overall, the share of U.S. liquid fuels consumption met by net imports fell from 60 percent in 2005 to an average of 33 percent in 2013 and EIA is projecting the net import share to decline to 22 percent in 2015, the lowest import rate since 1970.
The highest average U.S. production level was 9.6 million bpd in 1970.
EIA said recent U.S. production growth has been from lighter, sweet crude from tight resource formations, with roughly 96 percent of the 1.8 million bpd increase from 2011 to 2013 consisting of “sweet grades with lighter API gravity of 40 or above.”
EIA said it is forecasting that the U.S. “supply of lighter API gravity crude will continue to outpace that of medium and heavier crudes,” with more than 60 percent of the agency’s forecast production growth for 2014 and 2015 consisting of “light, sweet grades with API gravity of 40 or above.”
Natural gas storage low U.S. natural gas marketed production is projected to grow by 4.1 percent this year and 1.2 percent in 2015, EIA said.
“Rapid natural gas production growth in the Marcellus formation has contributed to low natural gas forward prices in the Northeast, and as a result new infrastructure has been proposed to take gas to other market regions.”
The eastward-flowing Rockies Express Pipeline began service in June on its Seneca Lateral pipeline, which takes Marcellus gas westward to the Midwest.
EIA said Rockies Express’ parent company, Tallgrass Energy, “plans to add bidirectional capability on a significant portion of (Rockies Express Pipeline)’s easternmost segment.”
EIA said growing domestic natural gas production is expected to put downward pressure on imports from Canada, with net imports of 3.7 billion cubic feet per day this year and 3.1 bcf per day in 2015 - the 2015 level would be the lowest since 1987.
Liquefied natural gas imports have fallen in recent years because higher prices in Europe and Asia are more attractive to sellers than the relatively lower U.S. prices. Several companies are also planning to export LNG from the U.S., with Cheniere Energy’s Sabine Pass facility expected to be the first to liquefy natural gas in the Lower 48 for export. That facility is scheduled to come online in stages beginning next year.
The natural gas spot price averaged $4.59 per million Btu at Henry Hub in June, and EIA said it expects spot prices to remain near current levels until the start of the next winter heating season.
Henry Hub natural gas spot prices are expected to average $4.77 per million Btu this year and $4.50 per million Btu in 2015.
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