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EIA: Volatility of crude oil price up Energy Information Administration says Brent averaged $47 per barrel in August, down $10 from July; US production down 140,000 bpd KRISTEN NELSON Petroleum News
Brent crude oil averaged $47 per barrel in August, down $10 per barrel from July, the U.S. Energy Information Administration said Sept. 9 in its Short-Term Energy Outlook.
“This third consecutive monthly decrease in prices likely reflects concerns about lower economic growth in emerging markets, expectations of higher oil exports from Iran, and continuing growth in global inventories,” the agency said.
Price volatility increased significantly in August, with four consecutive trading days - from Aug. 27 to Sept. 1 - when Brent had daily changes of more than 5 percent, EIA said, the longest stretch of such volatility since December 2008.
The agency said its Brent price forecasts for this year and next of $54 per barrel in 2015 and $59 in 2016, are unchanged from last month.
EIA said continuing increases in global crude inventories “have put significant downward pressure on prices,” with inventories up an estimated 2.4 million barrels per day the first eight months of the year, compared to an average build of 600,000 bpd in the same period in 2014. The agency said it expects inventory builds to moderate in the coming months, but to remain high compared with previous years.
West Texas Intermediate is forecast to average $5 per barrel below the Brent price. The WTI spot price averaged $43 per barrel in August, down $8 from July.
U.S. crude oil inventories remain elevated compared to historic levels, with the inventories at Cushing, Oklahoma, while 4.9 million barrels lower than the record high of 62.2 million barrels on April 17, still some 37 million barrels higher than at the same time last year.
US production down “U.S. monthly crude oil production is expected to decline through the middle of next year in response to low oil prices,” EIA Administrator Adam Sieminski said in a statement. “Output then begins rising in late 2016 as oil prices are forecast to move higher,” he said.
U.S. crude oil production averaged 8.7 million bpd last year and is expected to average 9.2 million bpd this year and then drop to 8.8 million bpd in 2016. EIA said the forecast numbers are some 100,000 bpd lower for both 2015 and 2016 than in its August forecast, and said that “reflects downward revisions to U.S. oil production estimates for the first half of 2015.”
EIA has begun to survey reported monthly crude oil production, with its data representing more than 90 percent of U.S. production. Based on that data, EIA revised monthly national production estimates from January through May downward by 40,000 bpd to 130,000 bpd, with the largest revisions including decreases of production in Texas and increases in the federal Gulf of Mexico.
EIA estimates that U.S. crude oil production in June was 9.3 million bpd, down 100,000 bpd from the revised May figure.
Based on its revised data EIA said U.S. production averaged 9.4 million bpd in the first half of the year, up 200,000 bpd from the average in the fourth quarter of 2014, despite a decline of almost 60 percent in the U.S. oil-directed rig count since October 2014.
Production is expected to decline through August 2016, when it is forecast to average 8.6 million bpd, and to begin rising in late 2016, returning to an average of 9 million bpd in the fourth quarter of 2016.
Twelve projects are scheduled to come online in the Gulf of Mexico this year and next, pushing up production from an average of 1.4 million bpd in the fourth quarter of 2014 to more than 1.6 million bpd in the fourth quarter 2016.
Cash flow, capital reductions EIA said expected crude oil production declines from May through mid-2016 “are largely attributable to unattractive economic returns in some areas of both emerging and mature onshore oil production regions, as well as seasonal factors such as anticipated hurricane-related production disruptions in the Gulf of Mexico.”
2015 cash flow and capital spending reductions have moved investment away from marginal exploration and research drilling. Focus instead is on core areas of major tight oil plays, with reduced investment leading to the lowest oil-directed drilling rig count in nearly five years and well completion rates significantly behind 2014.
Oil prices in the second quarter of 2015 were high enough for continued development drilling in the core areas of the Bakken, Eagle Ford, Niobrara and Permian basins.
EIA said WTI prices below $60 “are anticipated to slow the rate of recovery in onshore drilling and well completion totals, despite continued increases in rig and well productivity and falling drilling and completion costs.”
Projected production is the Gulf of Mexico increases, but Alaska oil production falls, the agency said, with these areas less sensitive to short-term price movements and reflecting anticipated growth from new projects and declines in legacy fields.
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