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EIA projects $103 Brent in second half WTI discount to Brent expected to narrow from $14 in 3rd quarter to $9 by late 2013; domestic crude production to average 6.3M bpd Kristen Nelson Petroleum News
The U.S. Energy Information Administration said Aug. 7 in its Short-Term Energy Outlook that it is projecting the Brent crude oil spot price to average about $103 per barrel in the second half of the year, up $3.50 from its July projection. EIA said the West Texas Intermediate crude oil spot price discount to Brent is expected to narrow from $14 in the third quarter to $9 by late next year.
The agency’s price forecasts assume the world oil-consumption-weighted real gross domestic product, which increased by 3 percent last year, will grow by 2.8 percent this year and by 2.9 percent in 2013.
U.S. total crude oil production is projected to average 6.3 million barrels per day this year, up 600,000 bpd from last year, and the highest level of production since 1997, EIA said. Next year’s domestic production is projected to increase to 6.7 million bpd.
The Henry Hub natural gas spot price is projected to average $2.67 per million Btu this year, compared to $4 last year and a projected $3.34 in 2013.
Growing US production U.S. crude oil production last year was 5.7 million bpd, an increase of 3.9 percent, 210,000 bpd, and EIA said it is forecasting 6.3 million bpd this year, the highest annual production since 1997.
Lower 48 onshore crude production is expected to grow by 670,000 bpd this year, with Gulf of Mexico output stabilizing after falling in 2011 and Alaska production continuing to drop by 30,000 bpd.
U.S. total crude oil output is projected to rise another 390,000 bpd next year, most of that from increases in Lower 48 production, EIA said, with the increase “driven by increased oil-directed drilling activity, particularly in onshore tight oil formations.”
The agency said Baker Hughes reported 777 onshore oil-directed drilling rigs at the beginning of 2011, 1,191 at the beginning of this year and 1,429 on Aug. 3.
The share of U.S. consumption met by liquid fuel net imports — crude oil and products — “has been falling since peaking at over 60 percent in 2005, and averaged 45 percent in 2011, down from 49 percent in 2010,” EIA said, noting that it expects a further decline to 41 percent this year and to 39 percent in 2013 “as a result of lower consumption and the substantial increases in domestic crude oil production.”
The agency said that if its 2013 projection holds, “it would be the first time the share of total U.S. consumption met by total liquid fuel imports is less than 40 percent since 1991.”
Natural gas U.S. natural gas consumption is expected to average 69.8 billion cubic feet per day this year, EIA said, an increase of 3.2 bcf per day, 4.8 percent, from 2011.
“Large gains in electric power use in 2012 will more than offset declines in residential and commercial use,” the agency said.
Growth in natural gas consumption is expected to slow in 2013, averaging 70.9 bcf per day, “driven by consumption increases from the residential, commercial and industrial sectors, as consumption in the electric power sector levels off.”
U.S. marketed production of natural gas grew by 4.8 bcf per day in 2011, 7.9 percent, “driven in large part by increases in shale gas production,” EIA said, and year-over-year growth is expected to continue this year, with an increase of 2.5 bcf per day projected.
Baker Hughes reported 498 natural gas rigs on Aug. 3, compared with 811 at the beginning of the year, the agency said.
There have been some declines in production this year, but declines from less profitable dry natural gas plays such as the Haynesville shale and continuing long-term decline in the Gulf of Mexico have been “offset by growth in production from liquids-rich natural gas production areas such as the Eagle Ford and wet areas of the Marcellus Shale, and associated gas from the growth in domestic crude oil production,” EIA said.
Gross pipeline imports of natural gas are expected to fall by 0.1 bcf per day, 1.3 percent, this year, “as domestic supply continues to displace Canadian sources.” Pipeline gross imports are expected to remain flat in 2013, at about 8.4 bcf per day. Pipeline gross exports grew by 1 bcf per day last year, driven by increased exports to Mexico, but are expected to be flat this year and to grow by 0.2 bcf a day next year.
Liquefied natural gas imports are expected to fall by 0.5 bcf per day (51 percent) from last year.
EIA said it expects between 0.5 and 0.6 bcf per day of LNG to arrive, mainly at the Elba Island terminal in Georgia, this year and next respectively, “either to fulfill long-term contract obligations or to take advantage of temporarily high local prices due to cold snaps and disruptions.”
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