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US expected to hit 10 million bpd in 2018 EIA forecasts domestic crude to average 9.7 million bpd this year, North Sea Brent to average $54 per barrel this year, $57 in 2018 Kristen Nelson Petroleum News
The U.S. Energy Information Administration said Dec. 12 in its December Short-Term Energy Outlook that crude oil prices traded at the highest levels in more than two years in November and early December.
“Average Brent crude oil spot prices climbed by $5 per barrel last month, rising from October’s average of $58 to $63 per barrel in November,” EIA Acting Administrator John Conti said following release of the outlook. “Our forecast, however, expects that average to retreat in 2018 to an annual average of $57 per barrel.” The agency expects Brent to average $54 this year.
The Organization of the Petroleum Exporting Countries said Nov. 30 that it would extend its crude oil supply reduction agreement through the end of next year, a move which had been broadly expected, EIA said. And non-OPEC countries which had agreed to crude oil production cuts in 2017 agreed to continue through the end of 2018.
EIA said it estimates that OPEC crude oil production averaged 32.5 million barrels per day in 2017, down 200,000 bpd from 2015, and expected to increase to an average of 32.7 million bpd in 2018.
Inventories EIA noted that commercial liquids inventories for countries in the Organization for Economic Cooperation and Development reached a record high of almost 3.09 billion barrels at the end of July 2016, falling by some 141 million barrels to less than 2.95 billion at the end of this November, while the surplus to the five-year average declined by 214 million barrels.
EIA said while it forecasts OECD inventories to increase by 51 million barrels from December through May, the level of inventories relative to the five-year average will decrease because of the increase in the five-year average.
“Despite the extension of the OPEC agreement, EIA forecasts higher output from non-OPEC countries to contribute to growth in total liquid fuels supply in 2018,” the agency said.
EIA is also forecasting an increase of 200,000 bpd in OPEC output in 2018, and said it expects the late 2017 crude oil price increases to contribute to U.S. production reaching more than 10 million bpd in 2018. U.S. crude oil production is forecast to increase by an average of 800,000 bpd in 2018, EIA said, with another increase of 700,000 bpd coming from a combination of Canada, Brazil, Norway, the United Kingdom and Kazakhstan.
Liquids fuel demand is projected to increase by more than 1.6 million bpd in 2018, compared to an increase of 1.4 million bpd this year, but demand growth is not expected to keep pace, EIA said, resulting in a modest increase in liquids inventories in 2018, resulting in a decline in Brent crude oil prices to some $57 per barrel in 2018.
Domestic crude production “U.S. crude oil production increased in November, up roughly 400,000 barrels per day from October’s production levels,” Conti said, with the agency attributing a large share of that to recovery of production in the Gulf of Mexico following Hurricane Nate. “An additional increase of 100,000 barrels per day in December is forecast to put production at 9.77 million barrels per day for the month,” he said.
The November U.S. crude oil production level is up 360,000 bpd from October, EIA said. U.S. production is forecast to average 9.2 million barrels for 2017 and 10 million bpd in 2018, the highest annual average production the U.S. has seen, surpassing a previous record of 9.6 million bpd in 1970.
The agency said the increase in U.S. production “largely occurs during the second half of 2018 and reflects crude oil prices during November and December 2017 that have been higher than previously expected in the STEO. The higher prices contribute to higher forecast rig counts and production in the Lower 48 onshore regions after about a six-month lag.”
Natural gas EIA said U.S. dry natural gas production is forecast to average 73.5 billion cubic feet per day this year, up 0.7 bcf from 2016, with 2018 production forecast to be nearly 80 bcf per day, some 6.1 bcf higher than 2017.
Henry Hub averaged $3.01 per million Btu in November, up nearly 14 cents from October, EIA said.
The agency said expected growth in both natural gas exports and domestic consumption next year contribute to a forecast increase in Henry Hub to $3.12 per million Btu in 2018.
EIA said increased takeaway capacity from Appalachia is expected to result in increased natural gas production and could limit significant upward price pressure, while noting that colder than normal temperatures through the end of 2017 could contribute to natural gas price increases.
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