U.S. crude oil production is projected to hit an all-time high this year, with crude oil prices expected to flatten to the $60-$61 per barrel average range this year and next, the U.S. Energy Information Administration said Jan. 9 in its January Short-Term Energy Outlook, the first to include 2019.
On prices, the agency said Brent, the benchmark for North Sea crude oil spot prices, is forecast to average $60 per barrel this year and $61 per barrel in 2019, after experiencing a sharp run up last year. While Brent averaged $54 per barrel in 2017, the December average was $64, up $2 per barrel from November, “the highest monthly average since November 2014,” and only the fourth time in the past 36 months that Brent has averaged more than $60.
The 2017 Brent average of $54 was an increase of $10 over 2016 levels, EIA said, with prices increasing fairly steadily throughout the second half of 2017 and year-end prices higher than the annual average, ending the year at a daily price near $67 per barrel, “the highest level since December 2014.”
The agency attributed most of the recent run-up in price to continuing draws on global inventory levels, and it estimates that global petroleum and other liquid fuels inventories fell an average of 400,000 barrels per day last year, “the first year of annual average draws since 2013.”
The decision in November by the Organization of the Oil Exporting Countries to extend the crude oil reduction agreement through the end of 2018 also provided price support, EIA said, as did a year-end disruption in the North Sea’s Forties crude oil pipeline system which forced fields feeding the line to be shut-in, resulting in a short-term curtailment of supply.
The agency said its forecast of $60 Brent this year and $61 in 2019 is based on an expectation that global oil inventories will rise this year and next, contributing to a decline in Brent prices in the first quarter of the year, with prices expected to remain relatively flat thereafter through 2019.
West Texas Intermediate is expected to average $4 below Brent this year and next, EIA said, down from the $6 price differential in the fourth quarter of last year as current constraints on transportation capacity between Cushing, Oklahoma, and the Gulf Coast are expected to lessen.
US production“EIA estimates that OPEC countries cut crude oil production output in 2017, but those cuts were offset by increased production in non-OPEC countries, especially the United States and Canada,” EIA Acting Administrator John Conti said in a Jan. 9 statement.
“EIA forecasts U.S. crude oil production to grow by 980,000 barrels per day in 2018, and we expect most of that growth to come from tight rock formations in Texas and North Dakota,” he said.
Non-OPEC production, led by the U.S. and Canadian oil sands projects, “is forecast to continue growing through the end of 2019,” Conti said, with growth of 2 million bpd of non-OPEC production in 2018 and 1.3 million bpd in 2019.
U.S. production for 2017 averaged an estimated 9.3 million bpd, and is estimated to have averaged 9.9 million bpd in December, EIA said.
U.S. crude production is forecast to average 10.3 million bpd in 2018, which would be the highest annual average U.S. production, surpassing a previous record of 9.6 million bpd in 1970. 2019 U.S. production is forecast to average 10.8 million bpd, and to top 11 million bpd in November 2019, the agency said.
U.S. production growth is estimated at 1.5 million bpd in 2018 and 1 million bpd in 2019, with Canada and Brazil expected to contribute combined growth in both years of some 400,000 bpd.
Multiple basin growthSome 800,000 bpd of the projected 1.2 million U.S. increase from December 2017 to December 2019 is expected to come from tight rock formations in the Permian region in Texas and New Mexico, the agency said.
Production from the Permian is expected to be 3.6 million bpd by the end of 2019, an increase of roughly 900,000 bpd from December 2017, and 32 percent of U.S. crude oil production in 2019.
Eagle Ford production is expected to be from 1.2 million bpd to 1.3 million bpd this year and next, which EIA said is slightly above the 2017 level.
In the Bakken production is expected to average 1.2 million bpd this year and 1.3 million bpd in 2019, up from 1.1 million bpd in 2017.
Gulf of Mexico production is expected to average 1.7 million bpd in 2018, relatively unchanged from 2017, and then increase to 1.8 million bpd with the anticipated start of production from the Appomattox project in the Rydberg field and the Mars project in the Kaikias field, along with other projects expected to begin operations this year and next.
EIA said Alaska crude oil production is expected to remain flat at some 500,000 bpd in 2018 and 2019, with ongoing exploration and development drilling and the start of production from the 1H NEWS project in late 2017 and Greater Moose’s Tooth in 2018 expected to keep production from declining in the state as it has in recent years.
Natural gasEIA said growth in crude oil production, especially in the Permian, is expected to result in increased associated natural gas production and processing.
Overall, dry natural gas production averaged 73.6 billion cubic feet per day in 2017, up 1 percent from 2016. The agency expects production to rise by 6.9 bcf per day, 9.3 percent, in 2018, and by 2.6 bcf, 3.2 percent, in 2019. EIA said if the 6.9 bcf increase is achieved in 2018, it would be the highest on record.
Liquefied natural gas gross exports are forecast to average 3 bcf per day in 2018, up from 1.9 bcf in 2017.
The U.S. exports natural gas by pipeline to Mexico and imports by pipeline from Canada, with imports averaging 8.2 bcf per day in 2017.
The U.S. was a net exporter of natural gas for the first time in 2017 on an annual basis, with net exports averaging 0.4 bcf per day, and expected to average 2.3 bcf per day in 2018 and 4.6 bcf in 2019.