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Brent, WTI crude oil prices down in July Energy Information Administration’s short-term outlook says market’s perception of risk down; US production hits 8.5 million bpd Kristen Nelson Petroleum News
July crude oil and natural gas prices were both down from June, based on market perception in the case of oil and production in the case of gas.
In its August Short-Term Energy Outlook the U.S. Energy Information Administration said the Brent crude oil spot price dropped in July to an average of $107 per barrel, down from a June average of $102. The agency credited a market “perception of reduced risk to Iraqi oil exports and news regarding increasing Libyan oil exports” as contributing factors.
July was the 13th consecutive month in which average Brent crude oil spot prices fell in the relatively narrow range of $107 to $112 per barrel.
EIA is projecting Brent to average $107 per barrel over the second half of 2014 and $105 in 2015.
WTI down in July West Texas Intermediate prices fell from an average of $106 per barrel in June to $104 in July, “despite record levels of U.S. demand for crude oil.”
EIA said the drop in WTI was due in part to “relocation of crude oil to refining centers along the Gulf Coast through new pipelines,” which resulted in a drop by more than half in crude oil inventories at the Cushing, Oklahoma, storage hub since the beginning of the year, “the futures market’s delivery point for WTI.” The drop was from nearly 42 million barrels Jan. 24 to less than 18 million barrels July 25, the lowest level since October 2008.
The WTI discount to Brent, which averaged $11 per barrel in 2013, is expected to average $8 per barrel this year and $9 per barrel in 2015, both projections $1 lower than the agency’s July forecast.
EIA said record-high refinery runs contributed to the drop in the WTI discount to Brent, which at $3 was the same this July as in July 2013, “when refinery runs were similarly at their seasonal peak for the year.”
Natural gas spot prices dropped from $4.47 per million British thermal units at the beginning of July to $3.78 per million Btu at the end of the month “as natural gas stock builds continued to outpace historical norms,” EIA said.
The agency expects the Henry Hub natural gas spot price, which averaged $3.73 per million Btu in 2013, to average $4.46 this year and $4 in 2015, drops of 31 cents and 51 cents, respectively, from EIA’s July forecast.
Non-OPEC production up EIA said it estimates that liquids production from non-Organization of the Petroleum Exporting Countries grew by 1.3 million barrels per day in 2013, averaging 54 million bpd for the year. The agency is estimating non-OPEC liquids production to grow by 1.8 million bpd this year and by 1.1 million bpd in 2015, with combined U.S. and Canadian production to grow by an average of 1.6 million bpd this year and 1.1 bpd in 2015.
EIA expects U.S. crude oil production to increase from an estimated 7.5 million bpd last year to 8.5 million bpd this year and 9.3 million bpd in 2015. The agency said the highest previous U.S. production level was 9.6 million bpd in 1970.
Oil production from the Gulf of Mexico is expected to increase from 1.25 million bpd last year to 1.44 million bpd this year, with 11 projects starting up this year, six of which began production in the first half of the year.
OPEC production averaged 29.8 million bpd in 2013, down 1 million bpd from 2012, “primarily reflecting increased outages in Libya, Nigeria and Iraq, along with strong non-OPEC supply growth.” EIA said OPEC crude oil production is expected to fall by 300,000 bpd this year and by less than 100,000 bpd in 2015, accommodating growing non-OPEC production.
OPEC surplus crude production capacity, concentrated in Saudi Arabia, is expected to average 2.1 million bpd this year and 2.7 million bpd in 2015.
Imports down There has been a significant decline in U.S. petroleum imports due to increases in domestic production, EIA said, with the share of U.S. liquid fuels consumption met by imports down from 60 percent in 2005 to an average of 33 percent in 2013, and expected to fall to 22 percent in 2015, the lowest level since 1970.
Total U.S. marketed natural gas production in 2014 is expected to grow by 0.8 billion cubic feet per day to 73.9 bcf per day, with a projected end-of-October working gas inventory of 3.45 trillion cubic feet.
The annual rate of U.S. marketed production is projected to grow 5.3 percent this year and 2.1 percent in 2015, with strong increases in the Lower 48 expected to offset Gulf of Mexico declines.
The latest data available is for May, which shows a year-over-year increase of 4 bcf per day from May 2013, with growing domestic production expected to put downward pressure on imports from Canada while increase exports to Mexico.
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