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EIA: Brent averaged $56 in March down $2 Agency expects $59 per barrel Brent average in 2015, $75 per barrel in 2016, with WTI down $7 from Brent this year, down $5 in 2016 Kristen Nelson Petroleum News
North Sea Brent crude oil prices averaged $56 per month in March, down $2 per barrel from the February average, the U.S. Energy Information Administration said April 7 in its Short-Term Energy and Summer Fuels Outlook. The agency forecasts that Brent will average $59 per barrel this year and $75 per barrel in 2016, both forecasts unchanged from last month’s outlook, with West Texas Intermediate expected to average $7 less than Brent this year and $5 less than Brent in 2016.
An agreement with Iran could change that forecast.
“A lifting of sanctions against Iran should a comprehensive nuclear agreement be concluded could significantly change the forecast for oil supply, demand and prices by allowing a significantly increased volume of Iranian barrels to enter the market,” EIA Administrator Adam Sieminski said in an April 7 statement. If and when those oil-related sanctions are lifted, he said, “EIA’s baseline outlook for oil prices in 2016 could be reduced $5 to $15 per barrel from the forecast presented in EIA’s current outlook.”
The agency said Iran is believed to have at least 30 million barrels of crude oil in storage, and the technical capability to ramp up production by at least 700,000 barrels per day by the end of 2016. EIA noted that the pace and magnitude of Iranian volumes reaching market would depend on the terms of a final agreement.
US production averaged 9.3 million bpd U.S. crude oil production averaged 9.3 million bpd in March, EIA said, but is expected to decline in June through September. Given the present price forecast, U.S. crude oil production is projected to average 9.2 million bpd this year and 9.3 million bpd in 2016.
U.S. crude oil production averaged 8.7 million bpd in 2014, and the current forecasts - 9.2 million bpd in 2015 and 9.3 million bpd in 2016 - are reductions of 0.1 million and 0.2 million bpd respectively from EIA’s March forecast. The agency said the reduction reflects rig counts falling faster than it had expected, “as oil-directed rigs have declined to the lowest level in more than four years as of late March.”
WTI is expected to average $48 per barrel in the second quarter of this year, EIA said, with 2015 onshore production expected “to decline beginning in that period because of unattractive economic returns in some areas of both emerging and mature oil production regions.”
The agency expects drilling activity to increase in the second half of the year based on a projected increase of WTI to an average of $57, with companies taking “advantage of lower costs for acreage leasing, drilling and well-completion services, resulting in growing production despite the relatively low WTI price.”
But EIA said the forecast “remains particularly sensitive to actual prices available at the wellhead, drilling economics that vary across regions and operators, and whether additional production from the backlog of well completions materializes.”
Marketed natural gas up U.S. natural gas consumption is projected to average 76.3 billion cubic feet per day this year and 75.8 bcf per day in 2016, compared with an estimated 73.5 bcf per day in 2014, EIA said.
The agency said consumption is largely driven by demand in the industrial and electric power sectors.
Marketed natural gas production is expected to increase by 3.8 bcf per day, 5 percent, this year, and by 1.5 bcf per day, 1.9 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.”
The agency said that while natural gas prices have fallen dramatically in recent months, it expects that increases in drilling efficiency and growth in oil production - even though at a slower rate - will continue to support growing natural gas production. Most natural gas production growth is expected to come from the Marcellus shale, with a backlog of drilled and uncompleted wells supporting production growth as new pipelines come online in the Northeast.
Increased domestic production is expected to reduce demand for natural gas imports from Canada, while supporting exports to Mexico, EIA said. A growing demand from Mexico’s electric power sector and flat Mexican natural gas production are expected to produce an increase in exports to Mexico, particularly from the Eagle Ford in South Texas.
The agency said liquefied natural gas imports “have fallen over the past five years because higher prices in Europe and Asia are more attractive to LNG exporters than the relatively low prices in the United States.” Gross LNG imports are forecast to average 0.2 bcf per day both this year and next, while LNG exports are projected to increase from an average of 0.04 bcf per day in 2014 to more than 0.79 bcf in 2016.
The Henry Hub natural gas spot price averaged $2.83 per million Btu in March, down 4 cents from February, and EIA said it expects monthly average spot prices to remain less than $3 per million Btu through May and less than $4 per million Btu for the remainder of the year. Henry Hub is projected to average $3.07 per million Btu this year and $3.45 in 2016.
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