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EIA pegs Brent at $61 this year, $67 next US crude production expected to be some 9.6 million bpd in May, to decline through early 2016, average 9.4 million bpd this year Kristen Nelson Petroleum News
North Sea Brent crude oil averaged $64 per barrel in May, the highest monthly average of 2015, the U.S. Energy Information Administration said June 10 in its Short-Term Energy Forecast. Despite global inventories which increased more than 2 million barrels per day for the third consecutive month, EIA said several factors contributed to the month’s higher price - continued signals of higher global oil demand growth; expectations for declining U.S. tight oil production; and growing risk of unplanned supply outages in the Middle East and North Africa.
EIA is forecasting that Brent will average $61 per barrel this year and $67 in 2016, with the 2016 number $3 lower than in the May forecast. West Texas Intermediate for both 2015 and 2016 is expected to average $5 per barrel less than Brent.
As of May 29, the agency said, Baker Hughes was showing the number of rigs drilling for crude oil in the U.S. had fallen for 25 consecutive weeks and was 60 percent below an October 2014 peak. Brent crude prices rose despite a more than 2 million bpd May increase in inventories - up for the third consecutive month - compared to an average inventory build of 1 million bpd in March through May of 2014.
WTI averaged $59 per barrel in May, up $5 per barrel from April, and crude oil inventories at Cushing, Oklahoma, which had increased for 20 consecutive weeks to a record 62.2 million barrels April 17, have fallen for six consecutive weeks by 3.2 million barrels.
Crude production 9.6 million bpd “U.S. crude oil production since mid-2014 has been more resilient to lower crude oil prices than many had expected, as reflected in modest upward revisions in fourth quarter 2014 and first quarter 2015 data,” EIA Administrator Adam Sieminski said in a statement.
“Despite the large decline in crude oil prices since June 2014, this May’s estimated oil output in the United States is the highest for any month since 1972, but production is still expected to decline in the second half of this year,” he said.
U.S. crude oil production averaged some 9.6 million bpd in May, EIA said, but “is expected to generally decline from June 2015 through early 2016 before growth resumes” due largely to unattractive economic returns in some emerging and mature onshore regions. The agency is projecting U.S. crude oil production to increase from an average of 8.7 million bpd last year to 9.4 million bpd this year and decline to 9.3 million bpd in 2016. The numbers are up slightly from the May forecast “primarily because of revisions to actual production data from the first quarter of 2015,” EIA said.
U.S. production has increased, the agency said, despite a 60 percent decrease in oil-directed rig count since October, as producers bring a backlog of uncompleted wells online.
EIA said reductions in 2015 capital expenditures and cash flows are prompting companies to focus on core areas of major tight oil plays, moving away from marginal exploration and research drilling.
Henry Hub averages $2.85 The spot price of natural gas at Henry Hub averaged $2.85 per million British thermal units in May, up from an April average of $2.61. EIA projects that the Henry Hub price will average $2.97 per million Btu this year and $3.32 in 2016.
Total U.S. natural gas consumption is forecast to average 76.7 billion cubic feet per day this year and 76.6 bcf per day in 2016, up from 73.5 bcf in 2014, with consumption growth this year largely driven by demand in the industrial and electric power sectors.
Marketed natural gas production is expected to increase by 4.2 bcf per day, 5.7 percent, this year and by 1.6 bcf per day, 2 percent, in 2016.
Production remains high and EIA said it expects continued growth through 2016, with increases in drilling efficiency continuing to support growing production despite relatively low natural gas prices.
“U.S. natural gas production is expected to reach a record in July,” Sieminski said.
The Marcellus shale is expected to be the source of most production growth, the agency said, “as a backlog of drilled wells is completed and new pipelines come online to deliver Marcellus gas to markets in the Northeast.”
EIA said increases in natural gas production are expected to reduce demand for natural gas from Canada and support growth in exports to Mexico, particularly from the Eagle Ford in South Texas, because of growing demand from Mexico’s electric power sector, combined with flat Mexican natural gas production.
Liquefied natural gas gross exports are expected to increase to 0.79 bcf per day in 2016 with the startup of a major LNG liquefaction plant in the Lower 48.
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