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Brent averaged $73 per barrel in August
EIA projects $73 this year, $74 in ’19, up $3 from August forecast; US crude averaged 10.9 million bpd in August, up 120,000 from June Kristen Nelson Petroleum News
The Brent crude oil spot price averaged $73 per barrel in August, down almost $2 from July, the U.S. Energy Information Administration said Sept. 11 in its Short-Term Energy Outlook. The expected average for the year is $73 per barrel, rising to $74 in 2019.
West Texas Intermediate is expected to average about $6 per barrel lower than Brent in both years. EIA said both the Brent and WTI forecasts for 2019, $74 and $67 per barrel respectively, are $3 per barrel higher than in the agency’s August STEO.
EIA Administrator Dr. Linda Capuano said in a Sept. 11 statement that rising upward expectations were “largely due to lower expectations for Canada’s crude oil production and OPEC’s condensate production.”
The agency said production from the United States was also expected to be lower than projected in 2019.
But, Capuano said, the U.S. “remains on pace to set new crude oil production records in 2018 and 2019,” with an average of 10.7 million barrels per day this year, up almost 14 percent from last year.
U.S. crude oil production is estimated to have averaged 10.9 million bpd in August, EIA said, up 120,000 bpd from June. The 2018 forecast is for an average of 10.7 million bpd, up from 9.4 million bpd in 2017. In 2019 the agency expects an average of 11.5 million bpd.
Globally, EIA is forecasting total global liquid fuels inventories to drop by 400,000 bpd this year, compared with 2017, and to increase by 100,000 bpd in 2019. “This outlook of relatively stable inventory levels during the forecast period contributes to a forecast of monthly average Brent crude oil prices remaining relatively stable,” the agency said, between $72 and $76 per barrel from September through the end of 2019.
Crude oil prices EIA said that while crude oil prices were up for August as a whole, crude oil prices and commodity prices broadly fell early in the month. The agency noted declines in some emerging market currencies as possibly contributing to global economic growth concerns and the potential impact on oil demand.
“However,” EIA said, “oil prices rose in the second half of August following reports of reduced purchases of Iranian crude oil ahead of the United States reinstituting sanctions on Iran in November.” The agency noted other supply developments which likely pulled on inventories, contributing to higher prices.
“A restart to some Canadian production after July’s oil sands outage is anticipated to be delayed until September, and tropical storm activity in the U.S. Gulf of Mexico led to the shutdown of some offshore crude oil platforms,” EIA said.
Permian region crude oil production is estimated to grow to 3.4 million bpd in September, with current estimates of available regional refinery intake and pipeline takeaway capacity at about 3.6 million bpd. EIA said crude oil takeaway infrastructure constraints could contribute to wide price discounts for Permian crude through the third quarter of 2019, moderating production growth compared to an unconstrained scenario.
“EIA still expects Permian crude oil production to drive total U.S. production growth next year,” the agency said, noting that many producers in the area say they can operate profitably at prices in the mid-$50 per barrel range, and might use higher cost transportation options to move crude to the U.S. Gulf Coast or other regions.
“Some producers with a geographically diverse portfolio of upstream properties could also redirect capital to other areas or decide to reduce completion activity until the transportation constraints ease,” the agency said.
Natural gas “EIA forecasts U.S. dry natural gas production to increase by 10 percent in 2018 to a record high 81 billion cubic feet per day with continued growth expected in 2019,” Capuano said.
Estimated U.S. dry natural gas production in August was 82.2 bcf per day, up 0.7 bcf from August, the agency said, and is projected to average 81 bcf per day this year, up 7.4 bcf from 2017 and establishing a new record high. EIA expects production to average 84.7 bcf per day in 2019.
The Henry Hub spot price averaged $2.96 per million British thermal units in August, up 12 cents from July, EIA said. The agency noted that cooling degree days in the U.S. averaged 13 percent higher than the 10-year, 2008-17, average in August, contributing to high natural gas demand for power presentation.
Henry Hub natural gas spot prices are expected to average $2.99 per million Btu this year and $3.12 in 2019.
EIA said natural gas inventories have been low during most of 2018 compared with the 2013-17 five-year average, reflecting “high residential and commercial consumption in early 2018 and growth in both liquefied natural gas and pipeline exports over the past year.”
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