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EIA: US on course for production record
Brent averaged $60 in October, down $3 from September, down $21 from October 2018; forecast to average $60 in 2020, down from $64
Kristen Nelson Petroleum News
The U.S. Energy Information Administration said in its Short-Term Energy Outlook, released Nov. 13, that Brent crude oil spot prices averaged $60 per barrel in October, down $3 per barrel from September and down $21 per barrel form October 2018.
EIA Administrator Dr. Linda Capuano said “EIA forecasts that the average spot price for Brent crude oil in 2019 will be almost $64 per barrel, a year-over-year decrease of $8 per barrel. In 2020, EIA expects the average crude oil price to continue decreasing, albeit at a slower pace than the change from 2018 to 2019.”
EIA said the projected decline is due to rising global oil inventories, particularly in the first half of 2020.
Annual averages, actual and forecast, as shown on the EIA’s website are $54.15 per barrel for Brent in 2017, $71.19 in 2018, an estimated $63.59 this year and $60.10 forecast in 2020.
West Texas Intermediate prices are expected to average $5.50 per barrel below Brent in 2020.
US production On the plus side, U.S. crude oil production continues to rise.
“The United States remains on course to set new crude oil production records this year and next,” Capuano said. “In fact, EIA’s November outlook expects that U.S. crude oil production will average more than 13 million barrels per day this month, the most U.S. oil production in one month on record.”
EIA data show an estimated 12.25 million bpd in U.S. crude production in the third quarter of 2019, projected to rise to 13.01 million bpd in the fourth quarter and to average 13.29 million bpd next year.
EIA said based on preliminary data and model estimates, it is estimating that the U.S. exported 140,000 bpd more crude oil and petroleum products in September than it imported, a growing trend, with exports exceeding imports by 550,000 bpd in October.
Capuano said more exact data for those months will be published later in November.
U.S. net exports expected to average 750,000 bpd in 2020.
Natural gas “U.S. natural gas production has outpaced U.S. consumption during 2019,” Capuano said, “resulting in increasing inventory levels.”
Storage injections in the U.S. outpaced the previous five-year average during the 2019 injection season, EIA said, a result of rising gas production.
Annual U.S. dry natural gas production is forecast to average 92.1 billion cubic feet per day this year, EIA said, up 10% from 2018. Production is expected to “grow much less in 2020 because of the lag between changes in price and changes in future drilling activity, with low prices in the third quarter of 2019 reducing natural gas-directed drilling in the first half of 2020.” Natural gas production is forecast to average 94.9 bcf per day next year.
LNG exports Liquefied natural gas exports are expected to average 4.7 bcf per day this year and 6.4 bcf per day in 2020, EIA said.
Capuano said EIA expects LNG exports “to increase to 5.8 billion cubic feet per day by the end of 2019 and 7.9 billion by December 2020.”
Gross exports averaged nearly 1.7 bcf per day in January 2017, she said. “Several new U.S. LNG export facilities, along with growing domestic natural gas production, are responsible for the rapid rise of the United States as a leading LNG energy exporter.”
EIA said three new liquefaction facilities - Cameron LNG, Freeport LNG and Elba Island LNG - commissioned their first trains in 2019, with natural gas deliveries to LNG projects setting a new record in July, an average of 6 bcf per day, increasing to 6.6 bcf in October, when new trains at Cameron and Freeport began ramping up.
EIA said Cameron LNG exported its first cargo in May, Corpus Christi LNG’s newly commissioned Train 2 exported its first cargo in July, followed by Freeport in September. Elba Island expects to ship its first export cargo by the end of the year, and in 2020, Cameron, Freeport and Elba Island expect to place their remaining trains in service, EIA said.
That will bring total U.S. LNG export capacity to 8.9 bcf by the end of 2020.
Global market risks Capuano said that over the past month global market risks have moderated, as Saudi Arabia’s production appears to have recovered from the attacks of Sept. 14. “Some of the demand side risks stemming from concerns over economic growth also seem to be diminishing,” she said, “as Americans set a new record for the month of October by consuming nearly 9.4 million barrels of gasoline.”
“Crude oil markets traded in a relatively narrow range in October following heightened volatility in September stemming from the attack on Saudi Arabian crude oil processing facilities,” EIA said.
It said the return of Saudi Arabian production to pre-attack levels is one indication of diminishing supply and demand side risks, along with receding expectations of lower oil demand related to lower economic growth, which appear to be providing some support for prices slightly above $60 per barrel.
The agency said there is some slower economic activity, such as third-quarter gross domestic product growth in China at the slowest rate since at least 1992, but there are other economic indicators which are up, such as the Manufacturing Purchasing Manager’s indexes, which increased in both China and the U.S., along with U.S. economic growth.
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