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US crude production for ’17 up 200,000 bpd North Sea Brent averaged $46 per barrel in August, up $1 from July; 4th consecutive month with average price between $44 and $49 KRISTEN NELSON Petroleum News
The U.S. Energy Information Administration is projecting U.S. crude oil production in 2017 to average 8.5 million barrels per day, up 200,000 bpd from the agency’s estimate in its August Short-Term Energy Outlook.
EIA Administrator Adam Sieminski said the decline was “not expected to be as steep as in previous forecasts, because of improved drilling rig efficiencies and more rigs drilling.”
The new outlook, released Sept. 7, says U.S. crude averaged 9.4 million bpd last year and is forecast to average 8.8 million bpd this year.
EIA said it estimates that U.S. crude production has fallen by 1.2 million bpd since April 2015, with almost all the decline in the Lower 48 onshore, a decline partly offset by growing production in the federal Gulf of Mexico.
The agency expects production to decline in most Lower 48 onshore areas through 2017, but expects the rate of decline to slow from 100,000 bpd in the second and third quarters of 2016 to only some 20,000 bpd in 2017.
EIA said the current price outlook is expected to limit onshore drilling and completions, but “that is expected to be partially offset by continued increases in rig and well productivity and falling drilling and completion costs.”
Lower 48 production is projected to average 6.2 million bpd in 2017, down from 6.5 million in the third quarter of 2016 and from an annual 6.7 million bpd average for all of 2016.
Production from the Gulf of Mexico is projected to average 1.9 million bpd by the fourth quarter of 2017, up from a 2015 average of 1.5 million bpd.
Overall, U.S. crude oil production is projected to be relatively stable between 8.5 million and 8.6 million bpd for most of 2017 except during the third quarter when EIA expects some production declines due to hurricane-related outages. U.S. production is expected to stabilize in 2017 because of productivity improvements, lower breakeven costs and forecast oil price increases, the agency said.
Crude prices EIA said the increase in the average spot price for North Sea Brent crude by $1 to $46 per barrel in August came in spite of global increases in oil inventories and the increase in U.S. oil rig counts, and said market reaction to a potential Organization of the Petroleum Exporting Countries deal to freeze production at current levels put upward pressure on August prices.
The agency said it expects global oil inventory builds to continue in the near future, averaging 600,000 bpd in the second half of this year, but remaining below levels seen last year and early this year. But even with the slowing pace of inventory builds, inventories are continuing to grow and high levels are expected to contribute to Brent prices staying in the $40 to $50 per barrel trading range for the next two quarters.
EIA said it forecasts Brent to average $45 per barrel in the fourth quarter of this year and the first quarter of 2017, but said global economic developments and geopolitical events could push prices near the top or bottom of the $40 to $50 per barrel range.
Global inventory draws are expected to begin in mid-2017, the agency said, and that expectation would contribute to rising prices in the second quarter of 2017, with Brent forecast to average $52 per barrel in 2017, and $58 per barrel in the fourth quarter of 2017, reflecting the potential for more significant inventory draws.
Average West Texas Intermediate is projected to be $1 per barrel lower than Brent this year and next, “based on the assumption of competition between the two crudes in the U.S. Gulf Coast refinery market,” EIA said.
Natural gas U.S. natural gas consumption is forecast to average 76.4 billion cubic feet per day this year and 77.1 bcf per day in 2017, compared to 75.2 bcf per day in 2015, EIA said.
2016 increases are primarily due to use of natural gas in the electric power sector, which is expected to increase 5.4 percent, before declining 2.3 percent in 2017, as rising natural gas prices contribute to increased use of coal.
Marketed natural gas production in June averaged 77.5 bcf per day, down 2.7 bcf from a record high daily average in February, the agency said.
EIA said it is forecasting production increases in the second half of 2016 through 2017 in response to forecast increases in price and in liquefied natural gas exports.
Natural gas pipeline exports to Mexico have risen this year, the agency said, with gross pipeline exports projected to increase in 2016 to an average of 5.6 bcf per day before declining slightly in 2017.
LNG gross exports are projected to rise this year to an average of 0.5 bcf per day and to 1.5 bcf per day in 2017.
Net imports of natural gas averaged 2.6 bcf per day in 2015 and are expected to decline to 0.2 bcf per day in 2017, with the U.S. becoming a net exporter of natural gas beginning in the second quarter of 2017.
The Henry Hub natural gas spot price averaged $2.82 per million British thermal units in August, unchanged from July, and EIA said it expects natural gas prices to gradually rise, averaging $2.42 per million Btu this year and $2.87 per million Btu in 2017.
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