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EIA forecasts $58 Brent in ’15; $75 in ’16 Agency says US crude oil production will average 9.3 million bpd this year, 9.5 million in ’16, close to 1970 high of 9.6 million Kristen Nelson Petroleum News
The U.S. Energy Information Administration is forecasting a Brent crude oil price averaging $58 per barrel this year, and $75 per barrel in 2016.
In its February Short-Term Energy Outlook EIA said January was the seventh month in a row of decreasing North Sea Brent crude oil prices. Brent reached $48 per barrel, the lowest rate since March 2009.
The agency said it expects U.S. crude oil production to average 9.3 million barrels per day this year, and based on its price forecast, to average 9.5 million bpd in 2016, close to the 9.6 million bpd U.S. record from 1970.
“The price decline reflects continued growth in U.S. light oil production and strong global supply, amid weaker global oil demand growth, which contributed to rising global oil inventories,” EIA said.
The agency said estimates for January commercial oil inventories in Organization for Economic Cooperation and Development countries were at the highest levels since August 2010. Those inventories are expected to grow.
“The amount of oil inventories held in industrialized countries is expected to be the highest on record at the end of this year because of global oil production growing at a stronger pace than fuel demand. The high oil inventories will be a key contributor to low petroleum prices,” EIA Administrator Adam Sieminski said in a statement.
Global consumption issues EIA said market fundamentals remain largely unchanged since its January forecast, with global production continuing to be higher than demand.
Global consumption is estimated to have grown by 900,000 bpd last year, averaging 92.1 million bpd for the year. EIA said it expects global consumption to grow by 1 million bpd both this year and next, with non-OECD consumption growth the main driver, estimated at 800,000 bpd in 2015 and 1.1 million bpd in 2016, with both rates lower than the 1.2 million bpd estimated growth rate in 2014.
OECD consumption fell by 300,000 bpd in 2014, EIA said, and is expected to grow by 200,000 bpd this year and decline by 100,000 bpd in 2016. Japan and Europe were the main contributors to consumption decline, and the United States is the main contributor to consumption growth, projected at 300,000 bpd this year and 100,000 bpd in 2016.
Production growth Non-Organization of the Petroleum Exporting Countries production grew 2.1 million bpd in 2014 and is expected to grow more slowly, by some 800,000 bpd both this year and next “in part because of lower projected oil prices,” EIA said, with slower production growth projected in the United States, Canada and South America.
OPEC crude oil production averaged 30.1 million bpd in 2014 and is expected to fall by 100,000 bpd this year and by 400,000 bpd in 2016.
OPEC surplus crude oil production capacity, concentrated in Saudi Arabia, is expected to increase to an annual average of 2.3 million bpd this year and to 2.7 million bpd in 2016, up from an average of some 2 million bpd in 2014, the agency said.
“Surplus capacity is typically an indication of market conditions,” EIA said, with surplus below 2.5 million bpd “an indicator of a relatively tight market.” Because of current and forecast levels of increasing inventories, the 2015 projected surplus capacity is “less significant,” the agency said.
US production EIA said U.S. crude oil production is forecast to increase from an average of 8.6 million bpd last year to 9.3 million bpd this year and 9.5 million bpd in 2016, but with West Texas Intermediate crude oil prices expected to average $50 in the first half of the year, the agency said it “expects 2015 drilling activity to decline because of unattractive economic returns in some areas of both emerging and mature oil production regions.”
2015 U.S. production is expected to peak at 9.4 million bpd in the second quarter and then decline by 180,000 bpd in the third quarter, with drilling activity expected to increase again in the second half of 2015 as companies take advantage of lower costs for leasing and drilling activities.
The agency said federal offshore and Alaska production - the former increasing and the latter decreasing - “are less sensitive to short-term price movements than onshore production in the Lower 48 states.”
Natural gas U.S. marketed natural gas production reached a record 77.3 billion cubic feet per day in November, EIA said, with Henry Hub spot prices projected to average $3.05 per million Btu this year, $1.34 lower than last year and down 39 cents per million Btu from the agency’s January forecast.
U.S. total natural gas consumption is projected to average 74.3 bcf per day this year and 75.2 bcf in 2016.
Marketed natural gas production is projected to increase by 2.9 bcf per day this year and by 1.7 bcf per day in 2016, with the increase reflecting continuing strong production in the Lower 48 states, more than offsetting long-term production decline in the Gulf of Mexico.
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