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Brent to average $104 in 2nd half WTA discount to Brent crude oil below $9 in April, expected to average $13 in 2013, $9 in 2014; US crude oil forecast up from April Kristen Nelson Petroleum News
The U.S. Department of Energy’s Energy Information Administration is projecting the Brent crude oil spot price to average $104 per barrel for the second half of the year and $101 per barrel in 2014. After increasing to $119 per barrel in early February, the Brent crude oil spot price fell to $97 per barrel in mid-April and then recovered to $105 per barrel May 3, EIA said in its May 2013 Short-Term Energy Outlook, released May 7.
The agency expects the Brent crude oil spot price to average $104 per barrel in the second half of the year and $101 per barrel next year.
EIA said the projected discount of West Texas Intermediate crude oil to Brent, which was more than $20 per barrel in February and fell to less than $9 per barrel in April, is expected to increase in the near term and average $13 per barrel this year and $9 per barrel in 2014.
On the domestic production side, EIA said it has revised its U.S. crude oil production forecast upward from April by 120,000 barrels per day for 2013 and by 310,000 bpd for 2014, with production now forecast to rise from an average of 7.1 million bpd in the first quarter of this year to 8.5 million bpd in the fourth quarter of 2014.
The Henry Hub natural gas spot price, which averaged $2.75 per million British thermal units last year, is expected to average $3.80 per million But this year and $4 per million Btu in 2014, up 27 cents and 40 cents, respectively, from EIA’s April forecast.
Global numbers EIA said it estimates that global fuels consumption outpaced production in the first quarter of the year, but expects production to exceed consumption in the second quarter, “consistent with the recent decline in crude oil prices.”
Liquids fuel production from non-OPEC countries is expected to increase by 1.1 million bpd this year and by 1.8 million bpd in 2014, an upward revision of 0.2 million bpd in the 2014 figure from the April forecast, EIA said.
“North America accounts for most of the projected growth in non-OPEC supply over the next two years because of continued production growth from U.S. tight oil formations and Canadian oil sands,” the agency said.
Growth is also expected in Central and South America by an average of 160,000 bpd, EIA said, “as Brazil and Colombia bring new production on line.”
OPEC supply is projected to fall by 0.5 million bpd this year and then rise by 0.1 million bpd in 2014, with most of the 2013 decline from Saudi Arabia, where production averaged 2.7 million bpd in the first quarter of the year, higher than the 2.1 million bpd average during the first quarter of 2012, but lower than the 3.8 million bpd average from 2009 through 2011.
EIA said it projects OPEC surplus capacity to increase to an average of 4.6 million bpd in the fourth quarter next year.
The Brent crude oil price is expected to average $106 per barrel this year, down from $112 in 2012, and to average $101 per barrel in 2014.
US production forecast EIA said the growing supply of domestic light crude oil in the Midcontinent has already prompted both midstream and downstream changes.
“Pipelines like Seaway that were once used to carry imported oil up from Gulf Coast ports to reach Midwest refiners have been reversed and are moving inland crude oil down to the Gulf, and their capacity is being dramatically expanded,” the agency said.
There is also new pipeline infrastructure under construction, including the southern portion of Keystone XL, slated to be in operation by year-end, with more pipeline construction proposed, along with “major developments in rail transport, where shipments of crude increased dramatically in 2012 compared to 2011,” EIA said.
The agency also said significant changes in refining are expected over the next few years to accommodate the growing supply of domestic light-sweet crude oil.
U.S. crude oil production is projected to rise from an average of 6.5 million bpd last year to 7.4 million bpd this year and 8.2 million bpd in 2014.
“Drilling in tight oil plays in the onshore Williston, Western Gulf and Permian basins is expected to account for the bulk of forecast production growth over the next two years,” the agency said.
Continued exploration success in the major plays in the Permian Basin is behind the EIA’s increase in its short-term forecast.
EIA said it “expects improvements in drilling and completing horizontal wells from multiwell drilling pads in the Permian Basin, which give operators greater access to large areas of resources in a number of stacked plays from a single surface location.”
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