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May 2018

Vol. 23, No.19 Week of May 13, 2018

EIA forecasts up for price, US production

Agency’s May Short-Term Energy Outlook predicts Brent at $71 this year, US crude at 10.7 million bpd, up to 11.9 million next year

Kristen Nelson

Petroleum News

The U.S. Energy Information Administration is forecasting higher Brent crude oil spot prices for this year and next, with the 2018 price now forecast to average $71 per barrel and the 2019 price averaging $66.

“The short-term outlook is revising its forecast for Brent crude oil spot prices, after April’s average came in at $72 per barrel, which was the first time the average for Brent spot prices topped $70 per barrel since 2014,” said EIA Administrator Linda Capuano in a May 8 statement. “Inventory draws and growing demand have offset production increases to push prices up. We can attribute strong demand to recent economic growth,” she said.

The Brent 2018 forecast is an increase of $7 per barrel from the April forecast, she said.

“While this month’s forecast also revises next year’s spot price higher, EIA expects that prices will decrease to an average of $66 per barrel in 2019,” Capuano said.

The 2019 forecast is up $3 per barrel from April.

EIA said it expects West Texas Intermediate crude oil prices to average $5 below Brent in both 2018 and 2019.

The agency said crude oil prices at the end of April reached their highest levels since 2014, “following five consecutive quarters of global oil inventory draws.” Global petroleum inventories have declined at an average of more than 500,000 bpd since January 2017, the beginning of the crude oil production agreement by countries both in the Organization of the Petroleum Exporting Countries and outside that organization, EIA said. The agency said that excluding countries not subject to the production reductions - Libya, Nigeria and Equatorial Guinea - OPEC production is estimated to have been 29.3 million bpd in April, the lowest level since April 2014 and 400,000 bpd below agreed-upon production reductions.

Another factor in the oil price rise may have been anticipation of reinstitution of sanctions on Iran, which, EIA said, could contribute to reductions in that country’s production.

The agency said it estimates that global oil demand also added to upward price pressures, with first quarter 2018 global consumption 1.9 million bpd, 2 percent, higher than in the first quarter of 2017.

US crude production rising

EIA said it estimates that U.S. crude oil production averaged 10.5 million barrels per day in April, up 120,000 bpd from March, and projects that the 2018 average will be 10.7 million bpd, up from 9.4 million bpd in 2017.

For 2019, EIA expects an average of 11.9 million bpd, an increase of 400,000 bpd from the April forecast, with production at the end of 2019 expected to be more than 12 million bpd, an increase the agency attributed to the higher price environment.

“The revised U.S. crude oil production growth forecast is the main contributor to increased global liquid fuels supply in 2018 and 2019,” EIA said, with a growth of 600,000 bpd on average forecast for 2019, compared with growth of less than 200,000 bpd expected in 2018.

“EIA expects the higher forecast inventory growth in 2019 compared with 2018 will put downward pressure on oil prices toward the end of 2018 and into 2019,” the agency said.

Natural gas

U.S. dry natural gas production averaged 73.6 billion cubic feet per day in 2017, EIA said, and is forecast to average 80.5 bcf per day this year, “establishing a new record.” The agency expects natural gas production to rise again by 2.9 bcf in 2019 to 83.3 bcf per day.

The agency said growing U.S. production is expected to support increasing natural gas exports, with net exports forecast to increase from 0.4 bcf per day in 2017 to an annual average of 2 bcf per day this year and 4.6 bcf per day in 2019.

Natural gas inventories in April ended the month 27 percent below the five-year average for the end of April.

“Last month was the coldest April in 21 years, which was likely why the month set the record for the smallest April U.S. natural gas injection on record, according to this month’s forecast,” Capuano said.

She said the May outlook “continues to expect that inventories will recover before the end of the year. The United States will likely set new natural gas production records this year, which will enable this injection season to push inventory closer to the five-year average by October.”

EIA said it expects Henry Hub natural gas spot prices to average $3.01 per million British thermal units this year and $3.11 in 2019. The agency said prices remained relatively flat despite inventories falling more than 500 bcf below the five-year average, and said it expects that higher natural gas production during the injection season will offset low storage levels and keep price movements moderate.






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