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January 2014

Vol. 19, No. 2 Week of January 12, 2014

US crude averaged 7.5 million bpd in 2013

EIA expects 2014 production figure to hit 8.5 million bpd, with 9.3 million projected for 2015; record was 9.6 million in 1970

Kristen Nelson

Petroleum News

The U.S. Energy Information Administration says U.S. crude oil production averaged 7.5 million barrels per day last year, is expected to average 8.5 million bpd this year and to increase to 9.3 million bpd in 2015, the highest annual average since U.S. production peaked at 9.6 million bpd in 1970.

“EIA expects annual U.S. crude oil production to come close to setting a new record high in 2015,” EIA Administrator Adam Sieminski said in a Jan. 8 statement.

With domestic crude oil production set to rise by 1 million bpd this year and almost that much in 2015, “U.S. oil production in 2015 could be the highest since 1972,” Sieminski said.

EIA said in its January Short-Term Energy Outlook, released Jan. 8, that strong domestic crude oil production growth is expected, “primarily concentrated in the Bakken, Eagle Ford, and Permian regions, continuing through 2015.”

Production from the Bakken formation in North Dakota and Montana averaged 880,000 bpd in 2013 and surpassed 1 million bpd in December, EIA said, while production from the Eagle Ford formation in South Texas was more than 1 million bpd last May, and reached an estimated 1.23 million bpd in December.

The Permian basin in West Texas and New Mexico averaged 1.32 million bpd in 2013, and EIA said it is projecting Permian production to grow more than any other region in the United States through 2015. Permian formations include the Spraberry, Bone Springs and Wolfcamp, and EIA said producers “are investing heavily in research and implementation of hydraulic fracturing in both vertical and horizontal wells. The stacked formations of the Permian allow vertical wells to reach several productive zones, while several horizontal wells drilled from the same surface location can target different formations or several pay zones within the same formation.”

“The growth in domestic production has contributed to a significant decline in petroleum imports,” Sieminski said, with the share of U.S. liquid fuels consumption met by imports expected to decline to 24 percent in 2015, “which would be the lowest level since 1970.”

Non-OPEC growth

Production from areas outside the Organization of the Petroleum Exporting Countries, OPEC, is expected to grow by 1.9 million bpd in 2014, EIA said, exceeding 55 million bpd by the end of the year. The U.S. and Canada are expected to account for almost 70 percent of non-OPEC growth, while OPEC crude production is expected to decline by 500,000 bpd in 2014, “mostly as a result of some OPEC producers cutting back production to accommodate non-OPEC supply growth.”

Non-OPEC supply growth is expected to be only 1.5 million bpd in 2015, just above a projected consumption growth of 1.4 million bpd.

OPEC crude oil production averaged 30 million bpd in 2013, down 900,000 bpd from 2012, “mostly as a result of increased outages in Libya, Nigeria, and Iraq,” EIA said. A further OPEC decline of some 500,000 bpd is expected this year.

For 2015, EIA said some key members of OPEC are expected to continue to reduce output, but with growing production from other OPEC members, 2015 output is expected to be close to 2014 levels.

Oil prices

“December marked the sixth consecutive month in which Brent crude oil prices averaged between $108 per barrel and $112 per barrel. Brent oil’s annual average price was $109 per barrel in 2013, $3 lower than in 2012,” Sieminski said.

EIA expects the downward trend in the Brent price to continue, he said, “as growing non-OPEC oil supply continues to outpace world consumption, with Brent crude oil prices averaging $105 per barrel in 2014 and $102 per barrel in 2015.”

The West Texas Intermediate crude oil price discount to Brent, “which fell to as low as $3 per barrel in July of 2013, averaged $13 per barrel in December,” Sieminski said. “EIA expects this wide discount to persist in 2014 and 2015, averaging $12 per barrel in both years.”

WTI, which fell from an average of $106 in September to $94 per barrel in November, increased to $98 per barrel in December “as a result of strong U.S. refinery runs,” EIA said.

EIA said it expects WTI to average $93 per barrel in 2014 and $90 per barrel in 2015, with the $12 per barrel discount to Brent based on “increasing uncertainty of the existing refinery infrastructure’s ability to absorb growing production of light sweet crude oil in North America at current prices.”

Pipeline capacity expansions and reversals have created “ample capacity to ship crude oil via pipeline from the previous bottleneck in the U.S. Midcontinent to the U.S. Gulf Coast,” EIA said, with the result that Light Louisiana Sweet crude oil, priced at a premium to Brent for must of the last two years, “has recently begun tracking WIT prices and selling at a discount to Brent.”






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