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EIA forecasts $61 Brent average in 2015 US crude production averaged 9.3 million bpd in March, expected to decline June thru September, average 9.2 million bpd this year Kristen Nelson Petroleum News
The U.S. Energy Information Administration s forecasting a North Sea Brent average crude oil price of $61 a barrel this year and $70 in 2016. The agency said in its May 12 Short-Term Energy Outlook that the forecast prices are $1 per barrel higher for this year and $5 per barrel lower for next year than in its April forecast.
Brent averaged $60 per barrel in April, up $4 from March and the highest monthly average this year. “Despite increasing global inventories, several factors contributed to higher prices in April,” EIA said, “including indications of higher global oil demand growth, expectations for declining U.S. tight oil production in the coming months, and the growing risk of unplanned supply outages in the Middle East and North Africa.”
West Texas Intermediate averaged $54 per barrel in April, up $7 from March, with moderating Cushing, Oklahoma, inventories, expected declines in U.S. tight oil production and increasing U.S. refinery runs putting upward pressure on the WTI price.
Production decline EIA said the estimate for U.S. crude oil production in March was 9.3 million barrels per day, but the agency expects production to decline from June through September before growth resumes. Based on its price forecast, EIA said it is projecting U.S. crude oil production to average 9.2 million bpd in both 2015 and 2016, and said the 2015 forecast was down 40,000 bpd, 0.5 percent, from the April forecast, while the 2016 was down 100,000 bpd, 1.1 percent.
U.S. crude oil production averaged 8.7 million bpd in 2014.
“Lower oil prices and fewer rigs drilling for crude will take a bite out of U.S. oil production growth this year and in 2016,” EIA Administrator Adam Sieminski said in a statement. The agency said the number of rigs drilling for oil in early May was the lowest in almost five years.
“While there are fewer rigs drilling for crude, U.S. oil production this year is still on track to be the highest in more than four decades,” Sieminski said.
In March, EIA was forecasting 9.3 million bpd this year and 9.5 million bpd in 2016, close to the peak 9.6 million bpd annual average of U.S. production in 1970.
Increasing production in 2016 EIA said it expects U.S. onshore production to decline beginning in the second quarter of 2015 “because of unattractive economic returns in some areas of both emerging and mature production regions. Reductions in 2015 capital expenditures, cash flows, and low-cost credit availability have encouraged companies to defer investment or redirect investment away from marginal exploration and research drilling to focus on core areas of major tight plays.”
The agency said projected crude oil prices for this year are high enough for development drilling to continue in the core areas of the Bakken, Eagle Ford, Niobrara and Permian basins. “Companies with lower drilling and debt-service costs that operate on acreage in the sweet spots of these regions are expected to continue to drill highly productive wells in 2015.”
EIA said with WTI crude oil prices expected to rise to an average of $67 per barrel in the second quarter of 2016 drilling activity is expected to pick up, with companies taking advantage of lower costs for leasing, drilling and well completions, “resulting in growing production beginning in the second quarter of 2016.”
Federal offshore and Alaska production are “less sensitive to short-term price movements than is onshore production in the Lower 48 states,” the agency said, and federal offshore production is projected to rise although Alaska production continues to fall.
Henry Hub down EIA is forecasting an average Henry Hub natural gas price of $2.93 per million British thermal units this year and $3.32 per million Btu next year, down 14 cents and 13 cents respectively from the agency’s April forecast.
Natural gas prices fell in April, then rose slightly in the early part of May. “Production and inventories remain abundant, which is expected to keep prices at relatively low levels in 2015,” EIA said.
Natural gas production averaged 70.46 billion cubic feet per day last year and is projected to average 74.77 bcf per day this year and 76.03 bcf per day in 2016, a projected increase of some 4.5 bcf per day, 6 percent, this year, and 1.3 bcf per day, 1.7 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.”
While natural gas prices are expected to remain low, the agency said it expects increases in drilling efficiency and increases in oil production will continue to support growing natural gas production, with most growth expected to come from the Marcellus shale.
Increases in production are expected to decrease demand for natural gas imports from Canada growth in exports to Mexico, particularly from the Eagle Ford in South Texas.
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