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EIA forecasts Brent average of $59 in ’15 February crude price up $10 from January, reflecting falling US rig counts, announced reductions in capital by major oil companies Kristen Nelson Petroleum News
Brent crude is forecast to average $59 a barrel this year and $75 a barrel in 2016, the U.S. Energy Information Administration said March 10 in its Short-Term Energy Outlook.
Brent averaged $58 per barrel in February, up $10 from its January average, “the first monthly average price increase since June 2014. The price increase reflects news of falling U.S. crude oil rig counts and announced reductions in capital expenditures by major oil companies, along with lower-than-expected Iraqi crude oil exports,” EIA said.
West Texas Intermediate prices are expected to average $7 lower than Brent in 2015 and $5 in 2016. The projected spread for 2015 is more than twice that forecast in February and EIS said it reflects “continuing large builds in U.S. crude oil inventories,” including at Cushing, Oklahoma.
EIA Administrator Adam Sieminski said “U.S. commercial crude oil inventories, which are already at the highest level since 1930, are expected to continue growing over the next two months.” He said the growth in inventories is expected to moderate as refineries ramp up in the second quarter and domestic oil production slows.
U.S. crude storage is at 62 percent of capacity, Sieminski said, compared to 48 percent a year ago.
9.4 million bpd U.S. crude oil production was estimated to average 9.4 million barrels per day in February, EIA said, is expected to average 9.3 million bpd this year, based on the current price forecast, and 9.5 million bpd in 2016, close to the record set in 1970 of 9.6 million bpd.
The agency said U.S. crude oil production averaged 8.7 million bpd in 2014, and with WTI crude oil prices expected to average $47 per barrel in the first half of this year, U.S. onshore drilling is expected to decline “because of unattractive economic returns in some areas of both emerging and mature oil production regions.”
“Many companies have begun redirecting investment away from marginal exploration and research drilling to focus on core areas of major tight oil plays,” EIA said, although projected prices remain high enough to support development drilling in the Bakken, Eagle Ford, Niobrara and Permian basins.
The agency said it expects 2015 production to reach an average of 9.4 million bpd for the second quarter and then decline by 170,000 bpd in the third quarter.
“With projected WTI crude oil prices rising in the second half of 2015, drilling activity is expected to increase again as companies take advantage of lower costs for acreage leasing and drilling services, resulting in growing production despite the relatively low WTI price.”
EIA noted that its forecast is “particularly sensitive” to actual prices at the wellhead, local drilling economics “and whether additional production from the backlog of well completions materializes.”
Production in the federal offshore and Alaska “is less sensitive to short-term price movements than onshore production in the Lower 48 states,” the agency said, with federal offshore production expected to rise, while production in Alaska falls.
Marketed natural gas record EIA said marketed natural gas production hit a record high of 78.8 billion cubic feet per day in December, despite declining prices and lower rig counts, “and likely reflects increases in rig efficiency.”
Natural gas production increased 6.1 percent in 2014, “the strongest growth since 2011.”
The agency said preliminary data indicate temporary production declines in early 2015, “largely attributable to freeze-offs during a few cold weeks in January and February.”
U.S. natural gas consumption is expected to average 75.7 bcf per day this year and 76.2 bcf per day in 2016, compared with estimated consumption of 73.5 bcf per day in 2014, with growth driven largely by demand in industrial and electric power sectors.
Marketed natural gas production is projected to increase by 3.7 bcf per day, 5 percent, in 2015 and by 1.6 bcf per day, 2 percent, in 2016, “reflecting continuing production growth in the Lower 48 states, which more than offsets the long-term declining production in the Gulf of Mexico,” EIA said.
The increases in U.S. natural gas production are expected to reduce the demand for imports from Canada and to increase exports to Mexico, particularly from the Eagle Ford, “because of growing demand from Mexico’s electric power sector, coupled with flat Mexican natural gas production.”
Gas prices low “Natural gas prices have remained low despite cold weather during February and early March, as domestic production growth remains strong,” Sieminski said.
The Henry Hub natural gas spot price averaged $2.87 per million British thermal units in February, down 12 cents from January, and EIA said it expects the spot price to remain less than $3 per million Btu through May and to average $3.07 per million Btu in 2015 and $3.48 in 2016.
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