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EIA: US could be leading producer in 2019
Agency projecting 11.8 million bpd next year; previous record of 9.6 million in 1970; forecasts Brent to remain above $70 this year
Kristen Nelson Petroleum News
The U.S. could be the world’s leading crude oil producer in 2019, the U.S. Energy Information Administration said July 10 in its Short-Term Energy Outlook.
“In 2019, EIA forecasts that the United States will average nearly 12 million barrels of crude oil production per day. If the forecast holds, that would make the U.S. the world’s leading producer of crude,” said EIA Administrator Dr. Linda Capuano.
U.S. crude oil production is estimated to have averaged 10.9 million barrels per day in June, EIA said, up 100,000 bpd from May. The agency is forecasting an average of 10.8 million bpd this year, up from 9.4 million bpd in 2017, and rising to an average of 11.8 million bpd in 2018, with both of those forecast levels surpassing the previous 1970 record of 9.6 million bpd.
Domestic growth EIA said 600,000 bpd of the expected 1.2 million bpd of crude production growth from June 2018 to December 2019 comes from tight rock formations in the Permian region in Texas and New Mexico, with the remaining increase from the Bakken, Eagle Ford, other Lower 48 regions and the federal Gulf of Mexico - collectively another 600,000 bpd of increase.
By the end of 2019 EIA expects the Permian to be producing 4 million bpd, some 600,000 bpd more than estimated June 2018 levels, and representing about one-third of forecast U.S. crude oil production at that time.
“Favorable geology along with technological and operational improvements have allowed the Permian to become one of the most economic regions for oil production,” EIA said. But growth is expected to be slower in 2019 than this year by some 400,000 bpd, reflecting increasing pipeline capacity constraints, the agency said, “which are expected to lower wellhead prices for the region’s oil producers and to have a dampening effect on Permian’s full production potential in the near term.”
In the Eagle Ford, production is expected to increase by some 200,000 bpd to 1.4 million bpd this year, and then increase to 1.5 million bpd in 2019. “The Eagle Ford region covers a significantly smaller geographic area with fewer prolific formations and fewer opportunities to drill compared with the Permian region. However, the Eagle Ford region does not have the same pipeline capacity constraints as the Permian region. Some producers could potentially target the Eagle Ford region and move away from the Permian in 2018 and in 2019, because the Permian region continues to experience constraints,” EIA said.
The Bakken, mostly in North Dakota, is expected to produce 1.2 million bpd this year and 1.4 million bpd in 2019, surpassing the previous record of 1.2 million set in 2015. EIA said much of the recent growth in the Bakken reflects removal of pipeline capacity constraints. “However, the Bakken region contains fewer identified prolific formations than the Permian region and is more significantly affected by winter weather,” EIA said.
The federal Gulf of Mexico is expected to produce 1.7 million bpd this year and 1.9 million bpd in 2019. Ten new projects are expected to come online this year, and seven more in 2019. EIA said if those projections are reached, Gulf production in both years would be the highest on record.
Elsewhere in the Lower 48, growth from June 2018 through December 2019 is expected in the Niobrara and Anadarko regions, with both forecast to grow by 100,000 bpd.
EIA said Alaska production is expected to remain flat at 500,000 bpd this year and next.
Oil prices “EIA forecasts Brent crude oil spot prices to remain above $70 per barrel this year,” Capuano said.
The agency expects Brent to average $73 per barrel in the second half of this year and $69 in 2019, with West Texas Intermediate expected to average $6 lower than Brent in the second half of the year and $7 lower in 2019.
Brent crude oil spot prices averaged $74 per barrel in June, down almost $3 from the May average, EIA said.
“Despite the decline, June marked the third consecutive month in which Brent crude oil spot prices averaged more than $70” per barrel, EIA said. “The price decline in June largely reflected market expectations in the early part of the month that OPEC, along with certain non-OPEC producers including Russia, would announce a production increase at the June 22-23 meetings,” the agency said.
The Organization of the Petroleum Exporting Countries did announce plans to increase production starting July 3, EIA said, but Brent spot prices increased after the announcement, possibly reflecting an expectation that those production increases would not be enough to offset falling production in Venezuela and Libya, and the potential for reduced volumes from Iran following the U.S. withdrawal from the Joint Comprehensive Plan of Action on Iran nuclear development.
In the second quarter of 2017 Brent averaged $50 per barrel, compared to $75 per barrel in the second quarter of 2018.
“The rising prices largely reflect continuing draws in global oil inventory levels,” EIA said, with global petroleum and other liquid fuels inventories down by an average of 500,000 bpd in 2017 and by 200,000 bpd in the first half of 2018.
Natural gas “The July outlook continues to forecast record production for U.S. dry natural gas in 2018 and 2019,” Capuano said. “Assuming the forecast holds, we will see production top 81 billion cubic feet per day in 2018, and another increase that will push production up to roughly 84 billion cubic feet in 2019.”
EIA said estimated dry natural gas production averaging 81.3 bcf per day in 2018 would be an 11 percent increase from 2017; a rise to 84.5 bcf per day in 2019 would be another 4 percent rise.
“The expected growth in natural gas production is largely in response to improved drilling efficiency and cost reduction, as well as higher crude oil prices that contribute to higher associated gas production from oil-directed rigs,” EIA said, with forecast natural gas increases supported by planned expansions in liquified natural gas and pipeline exports.
In the first quarter exports, including pipeline and LNG, averaged 9.6 bcf per day, up 9 percent from the first quarter of 2017 and up 67 percent from the first quarter of 2016.
Average Henry Hub natural gas prices have remained below $3 per million British thermal units since January, with the agency expecting an average of $2.99 this year and $3.04 in 2019.
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