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August 2017

Vol. 22, No. 33 Week of August 13, 2017

EIA: July Brent price up $2/bbl from June

US crude averaged 8.9 million bpd in 2016, forecast to average 9.3 million bpd in 2017, set new record at 9.9 million bpd in 2018

Kristen Nelson

Petroleum News

North Sea Brent crude oil spot prices averaged $48 per barrel in July, the U.S. Energy Information Administration said Aug. 8 in its Short-Term Energy Outlook, up $2 from the June average and up almost $4 per barrel from July 2016.

EIA said it is forecasting Brent to average $51 per barrel this year and $52 in 2018, with West Texas Intermediate forecast to average $2 less than Brent both this year and next.

Brent futures prices increased by $2.33 per barrel from July 3, settling at $52.01 Aug. 3, the agency said, with WTI up $1.96 per barrel in the same period, settling at $49.03. The July averages for Brent and WTI were $2.11 and $1.45 per barrel higher, respectively, than June averages.

EIA attributed the price increases to supply-side factors and strong U.S. refinery demand, with U.S. commercial crude oil and petroleum product inventories down by 22.4 million barrels from June 30 to July 28, compared with a five-year average of a build of 5.9 million barrels over that period.

US production

“U.S. oil production growth could slow,” said EIA Acting Administrator Howard Gruenspecht, “as some U.S. energy companies plan less investment spending for the rest of this year and the number of drilling rigs has recently increased at a slower clip.”

“The monthly increase in U.S. onshore oil production during the second half of 2017 is expected to slow from the pace seen during the first six months of the year,” he said.

U.S. drilling activity slowed measured by the Baker Hughes active oil rig count - up 10 rigs in July - which EIA said represented the fewest rig additions since the count began increasing in June 2016.

U.S. crude oil production is estimated to have averaged 8.9 million bpd in 2016, and is forecast to average 9.3 million bpd in 2017.

“The forecast calls for U.S. oil production rising over the next two years,” Gruenspecht said, “with oil output heading for an all-time high of just over 9.9 million barrels per day in 2018, surpassing the old record set in 1970” of 9.6 million bpd.

Month-over-month Lower 48 crude production is projected to increase 60,000 bpd in the second half of the year compared with an estimated average monthly growth of 110,000 bpd in the first half of the year, EIA said.

Organization of the Petroleum Exporting Countries member Saudi Arabia said it would cap that country’s crude oil exports in August, but Libya and Nigeria, also OPEC members, are continuing to increase crude production.

Commercial petroleum inventories in Organization for Economic Cooperation and Development countries are estimated to have decline the most year-over-year since April 2014, EIA said, while in the U.S. commercial crude oil stocks fell to 481.9 million barrels the week ending July 28, 95 million barrels above the five-year average.

Natural gas

U.S. dry natural gas production is forecast to average 73.5 billion cubic feet per day this year, EIA said, up 1.2 bcf per day from 2016, with 2018 production forecast to be 3.9 bcf per day above the 2017 level.

Gruenspecht said growth rates are expected to be 2 percent this year and more than 5.5 percent in 2018.

“Forecast record natural gas production in 2018 coincides with an expected rise in electricity generation from natural-gas fired power plants and a 23 percent increase in U.S. natural gas exports,” he said.

EIA said the Henry Hub spot natural gas price averaged $2.98 per million British thermal units in July, about the same as June, with higher natural gas exports and growing domestic production in 2018 contributing to a forecast Henry Hub spot price rising from a 2017 average of $3.06 per million Btu to $3.29 per million Btu in 2018.






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