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Brent to average $104, WTI $95 in 2014 US Energy Information Administration: November discount $14 per barrel; US crude production averages 8 million barrels per day Kristen Nelson Petroleum News
The North Sea Brent crude oil spot price averaged $110 per barrel in November for the fifth consecutive month in a row, the U.S. Energy Information Administration said in its December Short-Term Energy Outlook. The agency said it expects Brent to average $108 per barrel in December and decline to $104 per barrel next year, a weakening EIA attributed to non-OPEC supply growth exceeding the growth in world consumption.
EIA expects the West Texas Intermediate crude oil spot price to average $95 per barrel in 2014, down slightly from an expected fourth-quarter average of $96 per barrel.
WTI averaged $106 per barrel in September and fell to $94 in November.
The discount of WTI to Brent, which averaged $18 per barrel in 2012, fell to less than $4 per barrel this July and averaged $14 per barrel in November.
EIA said it expects the WTI discount to Brent “to average $12 per barrel during the fourth quarter of 2013 and $9 per barrel during 2014, as new pipeline capacity is adding from Cushing to the Gulf Coast.”
Record discounts U.S. Gulf Coast crude oil grades reached record discounts to international benchmarks in November, EIA said.
The spot discount of Light Louisiana Sweet, LLS, a key Gulf Coast light sweet crude oil, increased from $3 per barrel in September to almost $11 in November.
EIA said the large LLS discount to Brent “and the increasing convergence of LLS and WTI prices result from pipeline expansions and reversals that have reduced bottlenecks in the Midcontinent, continuing growth in domestic light oil production, and a seasonal decline in crude oil runs at U.S. Gulf Coast refineries.”
Brent spot prices “continue to be supported by ongoing supply outages in Libya and tightness in global light crude oil markets,” EIA said.
8 million bpd U.S. crude oil production averaged 8 million barrels per day in November, which EIA said was the highest monthly domestic production level since November 1988. The agency said crude oil production averaged 6.5 million bpd in 2012, is expected to average 7.5 million bpd this year and 8.5 million bpd in 2014.
“The continued focus on drilling in tight oil plays in the onshore Bakken, Eagle Ford, and Permian regions is expected to account for the bulk of the forecast production growth,” EIA said.
Henry Hub increasing The Henry Hub spot price for natural gas, which averaged $2.75 per million British thermal units in 2012, is expected to average $3.69 this year and $3.78 in 2014. The Henry Hub spot price averaged $3.64 per million Btu in November.
EIA projects U.S. natural gas marketed production to increase from 69.2 billion cubic feet per day in 2012 to 70.4 bcf per day this year and 71.4 bcf in 2014, while natural gas pipeline gross imports — which have been falling for 5 years — are projected to fall 0.5 bcf per day in 2013 and remain flat in 2014.
Natural gas production in the northeastern U.S. rose from 2.1 bcf per day in 2008 to 12.3 bcf in 2013, a trend which EIA said has reduced the cost and increased the supply of natural gas in the Northeast.
EIA said the additional supply has encouraged greater use of natural gas in the Northeast, especially for power generation, and has reduced net inflows from other regions such as the Gulf of Mexico, the Midwest and eastern Canada.
Domestic natural gas consumption, which averaged 69.6 bcf per day in 2012, is projected to average 70.7 bcf per day this year and 69.6 bcf per day in 2014, with colder winter temperatures in 2013 and 2014 — compared to 2012 — expected to increase the amount of natural gas used for space heating.
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