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EIA: Crude prices down, US production up Agency cites weaker global demand, increased Libyan exports for drop in prices; US hits highest monthly production since July 1986 Kristen Nelson Petroleum News
The North Sea Brent crude oil spot price averaged $102 per barrel in August, the first time in 14 months that price has fallen outside a range of $107 to $112 per barrel, the U.S. Energy Information Administration said in its September Short-Term Energy Outlook, issued Sept. 9.
“Weakening global demand and increased Libyan oil exports contributed” to the $5 per barrel, 4.7 percent, drop from July and $10 per barrel drop from June in the average Brent price, the agency said.
EIA said it is now projecting that Brent will average $106 per barrel this year - $103 per barrel in the fourth quarter - and $103 in 2015. All those projections are down from July, by $2 per barrel for 2014, $5 for the fourth quarter and $2 for 2015.
The average West Texas Intermediate spot price averaged $106 per barrel in June and fell to $97 in August. EIA said factors driving this drop were new pipelines taking crude oil to Gulf Coast refineries, dropping inventory levels at the futures market’s delivery point for WTI, the Cushing, Oklahoma, storage hub, to below 18 million barrels July 25, the lowest since October 2008.
Inventories at Cushing then built for four consecutive weeks, reaching 20.7 million barrels Aug. 22. The discount of WTI to Brent fell to an annual low of $3 in July and then increased to $5 per barrel in August. EIA said record high refinery runs in July contributed to the fall of the discount to $3, but “the discount widened in August while refinery runs remained elevated” and the agency is now projecting WTI crude oil prices to average $93 per barrel in the fourth quarter, $5 lower than its projection in July, and $95 per barrel next year, with the discount of WTI to Brent expected to widen and average $10 per barrel in the fourth quarter and $8 per barrel next year.
Domestic production up U.S. crude oil production averaged some 8.6 million barrels per day in August, EIA said, the highest monthly production since July 1986.
Domestic crude oil production averaged 7.5 million bpd in 2013 and is expected to average 9.5 million bpd in 2015, EIA said. “If achieved, the 2015 forecast would be the highest annual average crude oil production since 1970,” the agency said.
“The U.S. oil production forecast for 2015 was revised up by 250,000 barrels per day, with total output expected to be at the highest level since 1970,” EIA Administrator Adam Sieminski said in a statement on the agency’s September numbers.
EIA said growing domestic liquids production contributed to a significant decline in imports, with the share of U.S. petroleum and other liquids consumption met by imports down from 60 percent in 2005 to 32 percent in 2013, and expected to decline to 21 percent in 2015.
“Rising monthly crude oil production, which will approach 10 million barrels a day in late 2015, will help cut U.S. fuel imports next year to just 21 percent of domestic demand, the lowest level since 1968,” Sieminski said.
EIA said Gulf of Mexico production is expected to increase from 1.25 million bpd in 2013 to 1.67 million bpd in 2015, with 11 projects starting in 2014.
Natural gas prices down EIA said natural gas spot prices fell 15 percent from an average of $4.59 per million British thermal units in June to $3.91 in August, “even as natural gas stock builds continued to outpace historical norms.” The July price was $4.05 per million Btu. EIA said it expects spot prices to remain below $4 per million Btu through October, “before rising with winter heating demand.”
The Henry Hub spot price is projected to average $4.46 per million Btu this year and $3.87 in 2015.
Industrial natural gas consumption has grown steadily since 2008, the agency said, with relatively low prices making natural gas attractive as feedstock for chemical production, with ammonia-based fertilizer and methanol plants the most intensive industrial end users of natural gas.
New plants are under construction in Texas and Louisiana with in-service dates this year, while two large facilities are expected to come online in 2015, a methanol plant in Texas and a fertilizer/urea plant in Iowa.
EIA said it is projecting growth in industrial demand for natural gas to continue through 2015.
Natural gas marketed production is projected to grow by 5.3 percent this year and by 2.1 percent in 2015, with strong increases in the Lower 48 states expected to offset declining production in the Gulf of Mexico.
In June, the most recent month for which production data are available, marketed production was 4.6 billion cubic feet per day greater than in June 2013.
“Growing domestic production is expected to continue to put downward pressure on natural gas imports from Canada, and spur exports to Mexico,” EIA said. Exports to Mexico have been spurred recently by “growing demand from Mexico’s electric power sector and flat Mexican production,” providing an outlet for U.S. production, particularly from the Eagle Ford in Texas.
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