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US crude production to grow in 2015 Despite low oil prices, Energy Information Administration forecasts US at 9.3 million bpd next year, rising to 9.5 million in 2016 By KRISTEN NELSON Petroleum News
Crude oil prices continue to drop, a trend the U.S. Energy Information Administration is projecting through 2015, although U.S. crude oil production is projected to increase.
In its Short-Term Energy Outlook, released Jan. 13, EIA said the average monthly Brent crude oil price fell in December for the sixth consecutive month, averaging $62 per barrel, down $17 from November and the lowest the monthly average has been since May 2009.
“The December price decline reflects continued growth in U.S. tight oil production, strong global supply, and weakening outlooks for the global economy and oil demand growth,” the agency said.
Brent prices are projected to average $58 in 2015 and $75 in 2016, with West Texas Intermediate prices expected to average $3 to $4 per barrel below Brent.
“U.S. crude oil production in 2015 is expected to exceed its 2014 level, but lower crude prices will slow the growth in output,” EIA Administrator Adam Sieminski said in a statement.
Domestic crude oil production, which averaged 9.2 million barrels per day in December, is forecast to average 9.3 million bpd in 2015, growing to 9.5 million bpd in 2016, the second-highest annual average in U.S. history. U.S. annual average production peaked in 1970 at 9.6 million bpd.
U.S. crude oil production U.S. crude oil production averaged 8.7 million bpd in 2014, and with WTI expected to average $49 per barrel in the first half of 2015, EIA said it expects “drilling activity to decline because of unattractive economic returns in some areas of both emerging and mature oil production regions.”
“Many oil companies have cut back on their exploration drilling in response to falling crude prices and will concentrate their drilling activities in established areas that already have productive wells,” Sieminski said.
The agency said it expects prices to remain high enough in 2015 to support some development drilling in the Bakken, Eagle Ford, Niobrara and Permian, but at lower levels than previously forecast.
The agency expects 2015 production to reach 9.4 million bpd in the second quarter and then decline by some 190,000 bpd in the third quarter.
WTI crude oil prices are projected to rise in the second half of 2015, and with that rise drilling activity is also expected to increase with companies taking advantage of lower costs for acreage and drilling services, “causing production to resume rising at a relatively low WTI crude oil price.”
Production from the federal offshore, on increase, and Alaska, on decline, is “less sensitive to short-term price movements” than production onshore in the Lower 48, EIA said.
The agency warned that its forecast is sensitive to wellhead prices and varying costs across regions and operators.
Global issues North Sea Brent crude oil spot prices averaged $62 a barrel in December, the lowest monthly Brent average since May 2009. EIA said a combination of “robust world crude oil supply growth” and weak demand has contributed to rising inventories and falling prices.
The growth in global petroleum and other liquids consumption was 900,000 bpd, averaging 91.4 million bpd in 2014, a consumption growth less than half of the increase in production over the same period.
Production from the Organization of the Petroleum Exporting Countries averaged 29.9 million bpd in 2014, down slightly from 2013, while non-OPEC production was up 2 million bpd, averaging 56.2 million bpd for the year.
EIA said non-OPEC supply growth is expected to slow over the next two years because of lower projected oil prices.
Natural Gas Natural gas prices remain relatively low, “reflecting abundant supplies,” EIA said.
U.S. natural gas consumption is projected to increase to an average of 73.8 billion cubic feet per day in 2015 and 74.8 bcf per day in 2016, compared with an estimated 73.6 bcf per day in 2014.
A growth in marketed natural gas production is expected to continue through 2015 and 2016, the agency said, with strong growth in the Lower 48 offsetting declining Gulf of Mexico production.
The Henry Hub natural gas spot price averaged $3.48 per million Btu in December, down 64 cents from November, and EIA said it expects monthly average spot prices to remain less than $4 per million Btu until the fourth quarter of 2016, with projected averages of $3.44 in 2015 and $3.86 in 2016.
The agency said that although natural gas prices are down, it expects that increases in drilling efficiency and growth in oil production will continue to support growing natural gas production. There is also a backlog of drilled but uncompleted wells which will continue to support production growth as new pipeline infrastructure becomes available in the Northeast.
The growth in domestic natural gas production is expected to reduce imports from Canada and increase exports to Mexico, particularly from the Eagle Ford in South Texas, EIA said.
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