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EIA raises US crude production forecast Next year’s average of 8.7 million bpd up 0.1 million bpd from October; Brent expected to average $48 in fourth quarter, $51 in 2017 KRISTEN NELSON Petroleum News
The U.S. Energy Information Administration expects U.S. crude oil production, which averaged 9.4 million barrels per day in 2015, to average 8.8 million bpd this year and 8.7 million bpd in 2017, with the 2017 forecast up more than 100,000 bpd from the agency’s October forecast.
“Although average annual U.S. crude oil production is expected to be slightly below this year’s level in 2017, increased drilling activity in West Texas and southeastern New Mexico, along with rising oil output in the Gulf of Mexico, are expected to partially offset lower production in other areas of the country and make the decline smaller than previously forecast,” EIA Administrator Adam Sieminski said Nov. 8 in comments on the agency’s November Short-Term Energy Outlook.
Marketed natural gas production is forecast to average 77.3 billion cubic feet per day this year, down 1.4 bcf from the 2015 level, EIA said, the first annual decline since 2005.
“U.S. annual natural gas production is expected to decline in 2016 for the first time in 11 years, but then increase in 2017 as drilling activity picks up and new pipelines connect supplies to demand centers,” Sieminski said.
Brent close to $48 EIA said it expects Brent crude oil prices to average close to $48 per barrel in the fourth quarter of this year and in the first quarter of 2017.
For 2016 the agency is forecasting Brent to average $43 per barrel, rising to average $51 per barrel in 2017. West Texas Intermediate crude is forecast to average about $1 per barrel less than Brent in 2017.
EIA said while global consumption of petroleum products remains “relatively robust because of generally positive global economic data, the potential for additional crude oil supplies in the global market could push prices lower.”
There have been recent production gains from producers outside the Organization of the Petroleum Exporting Countries, including Russia, the United Kingdom and Brazil, the agency said, and “continued resiliency of onshore U.S. producers” all apply downward pressure on oil prices.
EIA said its November crude oil price forecast is generally unchanged from October, with Brent and WTI projected to remain close to current prices for the first two quarters of 2017 and then rise gradually in the second half of the year. But if global supply levels in the coming months are higher than forecast that would contribute to global oil balances, and that could result in lower than expected prices in 2017.
US crude production rising EIA said its projection of higher U.S. crude oil production is based on slower declines in Lower 48 production. There have also been recent increases in Permian region drilling, expected to lead to increases in production next year which will partially offset declines in other Lower 48 areas.
The agency said the Permian is the only U.S. region expected to show increases in production in October and November.
Eighty-one active rigs have been added in the Permian since the end of May, “with the region now holding almost as many active rigs as the rest of the United States, onshore and offshore combined,” EIA said.
In the Bakken and Eagle Ford rigs targeting oil have increased by 15 and four rigs respectively in the same period. SM Energy sold $785 million in Bakken assets to purchase $1.6 billion in Permian assets, reflecting the recent increase in merger and acquisition spending in West Texas.
And while U.S. crude oil production is forecast to decline in 2017, that decline is expected to be more than offset by increases in hydrocarbon gas liquids production, EIA said, with overall U.S. liquid fuels production forecast to increase by 200,000 bpd in 2017.
U.S. oil inventories are expected to decline this quarter and the first quarter of next year, but are expected to be offset by inventory builds in other Organization for Economic Cooperation and Development countries, with overall global inventories expected to build through the first half of next year.
“Sustained opposite movements of domestic and international crude oil and petroleum product inventories are rare, but that divergence is currently supported by differences in the shapes of the Brent and WTI futures curves,” EIA said.
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