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Brent at $52 this year, $54 in ’18 US crude production to average 9.2 million bpd in 2017, 9.9 million bpd in 2018, breaking previous record of 9.6 million from 1970 Kristen Nelson Petroleum News
The U.S. Energy Information Administration said Oct. 11 that North Sea Brent crude oil spot prices averaged $56 per barrel in September, up $4 per barrel from the August average. In its October Short-Term Energy Outlook the agency said Brent is forecast to average $52 per barrel this year and $54 per barrel in 2018, up $1 per barrel for 2017 from the September forecast and up $2 per barrel for 2018 compared with September.
EIA is forecasting record levels of U.S. crude oil production next year.
“Based on our observations of current drilling and price expectations, the forecast continues to project that U.S. crude oil production in 2018 will top the 1970 annual production record of 9.6 million barrels per day, with the current output forecast at 9.9 million barrels per day next year,” EIA acting Administrator John Conti said in an Oct. 11 statement.
The agency estimates that U.S. crude oil production averaged 9.3 million bpd in September, up some 250,000 bpd from August, with Gulf of Mexico production estimated to have increased to an average of 1.7 million bpd in September, following Hurricane Harvey, up 70,000 bpd from August.
U.S. crude oil production is forecast to average 9.2 million bpd this year, the agency said.
Crude oil prices EIA said the increase in Brent crude oil spot prices reflects “declining global oil inventories, increasing expectations for global economic and oil demand growth, and geopolitical events.”
The agency estimates that global oil inventories fell by 500,000 bpd in the third quarter. This was the third consecutive quarterly draw, the agency said, calling it the longest such stretch since 2013-14.
EIA said production from the Organization of the Petroleum Exporting Countries has been falling, contributing to global oil inventory withdrawals this year. OPEC crude is estimated to have averaged 32.9 million bpd in the third quarter, down from an average of 33.4 million bpd in November 2016, which was before OPEC’s voluntary production reduction.
The agency is forecasting OPEC production in the fourth quarter to decline further, averaging 32.7 million bpd.
EIA said unplanned OPEC outages remain low, but the Sept. 25 referendum in the Kurdistan region of Iraq where the majority voted for independence may be a reason for oil price increases. Turkey opposed the vote and threatened to disrupt pipeline flows of some 500,000 bpd of oil produced in the Kurdistan region which is exported from the Turkish port of Ceyhan.
The agency also cited economic conditions, which appear to be strengthening globally, as a possible contributor to oil demand growth next year.
The Brent-West Texas Intermediate spread was $6.40 per barrel in September, EIA said, noting that it “expects the hurricane-related increase in the spread to decline.”
The agency is forecasting an average spread of $3.50 per barrel between Brent and WTI in 2018, higher than the first half of 2017 when the spread averaged $1.69 per barrel, based on an expectation of increasing U.S. crude oil exports “to more varied and distant locations amid rising U.S. production. Asia, in particular, has become a growing destination for U.S. crude oil exports.”
The $3.50 forecast spread is higher than in September, when EIA forecast that WTI would be $2 per barrel less than Brent in 2018.
Natural gas The Henry Hub natural gas spot price averaged $2.98 per million Btu in September, 8 cents higher than August, EIA said. The agency said rising natural gas production is expected to keep pace with increasing consumption and export demand, particularly for liquefied natural gas, and it projects a balanced market for the last quarter of 2017 and 2018.
The Henry Hub spot price is estimated to average $3.03 per million Btu this year, increasing to an average of $3.19 per million Btu in 2018.
LNG export capacity is expected to increase, with exports exceeding 3 billion cubic feet per day in 2018, 66 percent higher than this year.
“In addition, increased takeaway capacity out of the Marcellus/Utica shale plays as a result of several new projects (such as the Rover and Nexus Gas Transmission pipelines) will help increase production.
A year-over-year increase in dry natural gas production of 4.9 bcf per day is projected for 2018, to a record of 78.5 bcf per day in that year.
Hurricane impacts “Despite the late summer’s hurricane disruptions, petroleum markets have largely returned to normal operations,” Conti said. He noted that on the Gulf Coast refineries were at 86 percent utilization by the last week in September, only 5 percentage points below average utilization for that time of year.
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