|
Crude price down to lowest since November EIA drops 2017-18 Brent forecasts by $2 to $51 this year, by $4 to $52 in 2018; US forecast to average 9.3 million bpd this year Kristen Nelson Petroleum News
The spot price for North Sea Brent crude averaged $46 per barrel in June, the lowest monthly average since November, and down $4 per barrel from May, the U.S. Energy Information Administration said June 11 in its monthly Short-Term Energy Outlook.
The agency has lowered its forecast Brent prices for both this year and next - to $51 per barrel in 2017, down $2 per barrel from last month’s forecast, and to $52 per barrel in 2018, down $4.
“A revised oil price forecast that is $2 to $4 per barrel lower for late 2017 and during 2018 than the prior forecast will make it less profitable for some U.S. producers to drill for oil,” EIA Acting Administrator Howard Gruenspecht said in a statement accompanying the outlook.
EIA estimates U.S. crude oil production to have averaged 8.9 million barrels per day last year, and is forecasting 9.3 million bpd this year, rising to an average of 9.9 million bpd in 2018, which, the agency said, “would mark the highest annual average production in U.S. history.” The previous record, 9.6 million bpd, was set in 1970.
“A lower forecast for crude oil prices is expected to shave a little off projected growth in U.S. oil production next year compared with the previous forecast, but annual output is still on track to reach a record high in 2018,” Gruenspecht said.
He also noted that the U.S. is expected to account for 90 percent of non-OPEC growth in crude oil and liquids production in 2018.
Crude oil prices Brent and West Texas Intermediate crude oil prices have declined by $2.52 and $2.84 per barrel, respectively, EIA said, reaching “their lowest levels year-to-date in late June.” The agency said increases in U.S. crude oil and petroleum product inventories were above their five-year averages for weeks ending June 2 and June 9. “The build in total petroleum inventories for the week ending June 2 was the largest for any week since 2008,” EIA said, with rising production in June from Libya and Nigeria also putting downward pressure on prices.
With continuing production increase in the U.S. petroleum inventories for the Organization for Economic Cooperation and Development remained 9 percent above the previous five-year average.
Brent crude oil spot prices declined by nearly 5 percent in late May following news of agreement by the Organization of the Petroleum Exporting Countries to extend production cuts through the first quarter of 2018.
EIA said global oil inventories are projected to be relatively unchanged in the second half of this year before returning to average inventory builds of 200,000 bpd next year.
“Given this expectation of relative balance in the global oil market through the forecast period, Brent crude oil spot prices are expected to remain fairly flat in the coming months,” the agency said.
EIA said it expects average WTI prices to be $2 below Brent this year and next, “based on the assumption that rising U.S. crude oil production will result in WTI priced U.S. crude oil exports competing with international volumes priced off of Brent in global crude oil markets.”
US production While EIA expects U.S. production to reach a new high in 2018, averaging 9.9 million bpd, the agency’s 2018 forecast is 100,000 bpd lower than in June because of lower forecast crude oil prices in late 2017 and 2018.
Crude oil production in the U.S. is forecast to reach 10.1 million bpd in December 2018, 900,000 bpd higher than June 2017 and an increase of 1.4 million bpd from the end of 2016.
“Increased production from tight rock formations within the Permian and Eagle Ford regions in Texas and the Bakken region in North Dakota” account for 1.1 million of the expected 1.4 million bpd increase from the end of 2016 through the end of 2018, with most of the remaining 300,000 bpd from the federal Gulf of Mexico, where seven new projects are expected to come online by the end of 2018.
Permian production is expected to reach 2.9 million bpd by the end of 2018, up some 500,000 from the end of 2017, and representing some 30 percent of U.S. crude oil production in 2018. EIA said that because large geographic regions of the Permian are stacked plays, “operators can continue to drill through several tight oil layers and increase production even with sustained WTI prices below $50/b.”
Production from the Eagle Ford is projected to average 1.3 million bpd this year and next, up from 1.2 million bpd in late 2016. “Similar to the Permian, Eagle Ford wells have high initial production rates and fast decline rates,” EIA said.
Bakken production is projected to average 1.1 million bpd this year and next, below the 1.2 million bpd the region produced in 2015, based on an expected WTI price of below $50 until the second half of 2018.
Gulf of Mexico production is expected to average 1.7 million bpd this year, up 100,000 bpd from 2016, and then increase to 1.9 million bpd in 2018, based on new and expanded projects.
| 