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US crude to reach all-time high in 2018 EIA projecting average of 9.7 million bpd next year led by increased Permian, Gulf of Mexico production, breaking 1970 record KRISTEN NELSON Petroleum News
U.S. crude oil production averaged an estimated 8.9 million barrels per day in 2016, and is forecast to average 9.2 million bpd this year, the U.S. Energy Information Administration said March 7 in its Short-Term Energy Outlook.
That production is expected to increase.
“U.S. crude oil production is now expected to reach an all-time high in 2018, reflecting an increased forecast of domestic oil production growth,” EIA Acting Administrator Howard Gruenspecht said in a statement. He said domestic oil output, driven by increased drilling in the Permian basin in Texas and New Mexico and rising production in the Gulf of Mexico, is expected to average 9.7 million bpd in 2018, “breaking the U.S. total annual production record set back in 1970.”
The agency said the North Sea Brent spot price averaged $55 per barrel in February.
“Rising crude oil production from non-OPEC countries, especially from the United States, is expected to curb upward pressure on oil prices for much of 2017,” Gruenspecht said, with Brent forecast to average $55 this year and $57 next year.
“Crude oil prices are expected to remain stable over the coming months as the global oil market is forecast to be largely in balance during 2017,” he said.
West Texas Intermediate is forecast to average about $1 less per barrel than Brent.
Natural gas U.S. natural gas production is forecast to average 73.7 billion cubic feet per day this year, up 1.4 bcf per day from 2016, and reversing a 2016 production decline which was the first since 2005. In 2018 natural gas production is forecast to rise by an average of 4.1 bcf per day, EIA said.
The average Henry Hub natural gas spot price fell by 45 cents per million British thermal units from January to $2.85 per million Btu, the agency said.
“This winter’s warm weather is cutting into U.S. natural gas demand, with natural gas consumption during February expected to be the lowest for the month in eight year,” Gruenspecht said. “Lower natural gas demand and above-average gas inventories are putting downward pressure on U.S. natural gas prices, as the average spot price for natural gas is now revised down 12 percent for 2017,” he said.
EIA said new natural gas export capabilities in the U.S. and growing domestic natural gas consumption are contributing to the agency’s forecast that Henry Hub natural gas spot prices will rise from an average of $3.03 per million Btu this year to $3.45 in 2018.
Crude oil markets EIA noted that crude oil prices continued to trade in a narrow range during February, with Brent and WTI average spot prices higher by 37 cents and 94 cents, respectively, compared to January.
The agency said the oil market appears to be in “closer balance between supply and demand in early 2017,” with voluntary supply reductions by members of the Organization of the Petroleum Exporting Countries and some non-OPEC members apparently “achieving a high degree of compliance.”
Global oil inventories are estimated to be down almost 1 million bpd in February, “which would be the third-largest monthly decline rate since the beginning of 2014,” EIA said, noting that oil market outlook is uncertain because of supply development.
The agency expects supply from non-OPEC countries in the second quarter of this year to be close to the fourth-quarter level from last year, with OPEC supply forecast to decline.
“Lower OPEC market share could complicate whether its members will renegotiate voluntary supply reductions for the second half of 2017,” EIA said. The agency said it expects increases in non-OPEC supply, particularly from the U.S., to limit upward price pressure through most of this year.
Natural gas With mild weather across much of the Lower 48 in February, EIA said initial data indicate heating degree days were the lowest on record for the month, contributing downward pressure on natural gas prices.
Natural gas prices for February were higher than in the previous year because of higher exports and lower U.S. natural gas production, but inventory levels remain above the previous five-year average, the agency said.
Liquefied natural gas exports are forecast to average 1.8 bcf per day this year and 2.8 bcf per day in 2018, up from the February forecast “based on updates to commercial in-service dates and ramp-up periods of LNG facilities currently under construction,” EIA said.
The forecast for Henry Hub natural gas spot prices is lower this forecast by 40 cents per million Btu in 2017 and 25 cents per Btu in 2018, reflecting mild winter temperatures which reduce the use of natural gas for space heating, contributing to natural gas inventory levels which are higher than previously expected for the end of February.
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