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EIA sees Brent at $43 this year, $51 next US crude to average 8.7 million bpd in 2016, 8.6 million bpd in 2017; with global inventory builds at 700,000 bpd, 300,000 bpd KRISTEN NELSON Petroleum News
The U.S. Energy Information Administration has adjusted its forecast for Brent prices in its October Short-Term Energy Forecast, estimating $43 per barrel this year and $51 per barrel in 2017 - an increase from September of $1 per barrel this year and a decrease of $1 for next year.
West Texas Intermediate prices are forecast to average about $1 less than Brent both this year and next.
The agency warned that current values of futures and options contracts suggest high uncertainty for oil prices.
EIA said prices in the fourth quarter of this year and the first quarter of 2017 are forecast to average $48 per barrel, up $3 from the agency’s previous forecast. “The higher forecast reflects lower expected global oil inventory builds during 2016 and lower risk of OPEC crude oil production coming in above forecast levels in 2017,” EIA said.
On the down side, Brent is now forecast to average $55 in the fourth quarter of 2017, down $3 from the previous forecast, reflecting higher expected oil production in Russia and the United States.
Production U.S. crude oil production is forecast to average 8.7 million barrels per day this year and 8.6 million bpd in 2017, with the 2017 forecast up almost 100,000 bpd from September.
EIA attributed the higher 2017 oil production forecast to changes in modeling methodology for the Lower 48 - excluding the federal Gulf of Mexico.
“Most important in the new methodology, all horizontal wells drilled since 2014 are fit with individual decline curves and projected out to 2020 before being aggregated to state and sub-state region levels,” EIA said.
The agency said oil production from Libya and Russia is expected to increase, there is a potential for reduced disruptions to Nigeria’s production “and a recovery in U.S. crude oil production beginning in mid-2017.”
Some additional oil volumes could add supplies in Europe and “put some downward pressure on Brent prices for delivery in the coming months,” EIA said.
Global oil inventory builds are forecast to average 700,000 bpd this year and 300,000 bpd in 2017, EIA said, 100,000 bpd lower and 300,000 bpd higher than the previous forecast.
Investment The agency said second-quarter financial results for 46 publicly traded U.S. onshore oil producers “showed improved financial conditions compared with the first quarter.”
“Cash from operations increased from the first quarter to the second quarter of 2016, reflecting higher crude oil prices. Many companies improved operating efficiency, reduced costs, and improved their balance sheets as crude oil prices stabilized. Higher prices also provided the opportunity for these companies to hedge future production at more favorable price levels, with recent price increases likely encouraging additional hedging activity.”
The agency said there were also rising capital expenditures at these companies in the second quarter over the first, “the only quarter-over-quarter increase since 2014.”
Rising rig counts implied increased drilling, EIA said, and merger and acquisition announcement “suggest that some companies were actively expanding investment budgets in the second quarter of this year.”
Natural gas Natural gas marketed production fell from 79.7 billion cubic feet per day in September 2015 to 76.5 bcf in July, EIA said. The agency expects marketed natural gas production to average 77.5 bcf this year, down 1.6 percent from the 2015 level, the first annual decline since 2005, with production forecast to increase by 3.7 bcf in 2017.
Henry Hub spot prices are forecast to average $3.04 per million Btu in the fourth quarter and $3.07 in 2017.
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