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EIA sees steady non-OPEC production growth
Energy Information Administration’s January Short-Term Energy Outlook includes 2020, with $61/barrel Brent in ’19, $65 in ’20 Kristen Nelson Petroleum News
The U.S. Energy Information Administration’s January Short-Term Energy Outlook includes 2020 for the first time - and is forecasting that Brent prices, which averaged $71 per barrel in 2018, will average $61 per barrel this year and $65 per barrel in 2020.
U.S. crude oil production, estimated to have averaged 10.9 million barrels per day last year, up 1.6 million bpd from 2017, is forecast to reach 12.1 million bpd in 2019 and 12.9 million bpd in 2020.
“Steady growth from non-OPEC countries, including the United States, headlines the forecast for global crude oil production through 2020,” EIA Administrator Dr. Linda Capuano said in a statement accompanying the release. “We expect the United States to remain the world’s largest producer,” she said. With U.S. crude oil imports projected to decline over the next two years, and assuming the forecast holds, Capuano said it is expected “that the United States will become a net exporter in late 2020.”
The EIA estimate of U.S. production for 2018, 10.9 million bpd (an increase of 1.6 million bpd from 2017), surpassed the old record set in 1970, and the forecast averages of 12.1 million bpd this year and 12.9 million bpd in 2020, “would allow the United States to maintain its status quo as the world’s leading crude oil producer in both years,” the agency said.
Of the 1.1 million bpd increase projected from 2018 to 2019, 600,000 bpd is forecast to come from tight rock formations in the Permian in Texas and New Mexico, along with 500,000 bpd of the 800,000 bpd increase from 2019 to 2020. EIA said the remaining increase comes from the Bakken, Eagle Ford, Niobrara and Anadarko regions and from the federal Gulf of Mexico.
Lower 48 growth basins EIA expects the Permian to produce 4.8 million bpd by the end of 2020, some 1 million bpd more than estimated December 2018 levels, and representing about 36 percent of U.S. crude oil production by the end of 2020.
“Favorable geology and technological and operational improvements have allowed the Permian to become one of the most economic regions for oil production,” the agency said. EIA noted that the annual Permian growth rate in 2019, 600,000 bpd, is 400,000 bpd below the 2018 growth rate: “The flattening of the growth rate reflects increasing pipeline capacity constraints in the Permian region, 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 short term.”
Eagle Ford production is forecast to increase by almost 90,000 bpd to 1.4 million bpd in 2019 and then fall slightly in 2020. That region, EIA said, “covers a significantly smaller geographic area with fewer prolific formations and fewer opportunities to drill compared with the Permian region.”
The Bakken, mostly in North Dakota, produced 1.3 million bpd in 2018 and is forecast to produce 1.4 million bpd this year and 1.5 million bpd in 2020, with recent growth reflecting the removal of pipeline capacity constraints affecting the region before 2017. Like the Eagle Ford, the Bakken has fewer identified prolific formations than the Permian “and is more significantly affected by lower prices and winter weather.”
Federal Gulf of Mexico production is expected to average 1.9 million bpd in 2019 and 2.2 million bpd in 2020, up from 1.7 million bpd in 2018. Eleven new projects came online in the Gulf in 2018, six more are expected to come online in 2019 and another 12 in 2020.
Growth is expected from 2018 through 2020 in the Niobrara and Anadarko regions; Alaska production is expected to remain flat at 500,000 bpd in 2019 and 2020, EIA said.
Relative balance “EIA sees global oil markets in relative balance over the next two years with U.S. production growth more than offsetting declining production from OPEC, and some non-OPEC countries, due to last month’s announced production cuts. The January forecast expects some limited upward price pressures ahead, as demand is likely to grow by 1.5 million barrels per day,” Capuano said.
Production growth in the period is led by non-OPEC countries, EIA said, particularly the United States and Brazil, with non-OPEC producers expected to increase oil supply by 2.4 million bpd in 2019, offsetting forecast supply declines of 1 million bpd by OPEC members. “In 2020, the main drivers of oil production growth are expected to be the United States, Canada, Brazil, and Russia, while OPEC crude oil production is expected to remain flat.”
Prices The 2018 average for Brent crude oil spot prices was $71 per barrel, up $17 per barrel from 2017 levels. Daily Brent prices in 2018 peaked at $86 per barrel in October, the highest level since October 2014, EIA said, before falling to nearly $50 per barrel by the end of the year. “The price decrease in the latter part of 2018 reflected global oil inventory builds and record levels of oil production from the world’s three largest producers - the United State, Russia, and Saudi Arabia - along with uncertainties about global demand growth for the coming year,” the agency said.
The price forecast for Brent over the period of the forecast is a gradual increase from $57 per barrel in December 2018 to $65 per barrel by December 2020.
“Given the expectation of relatively balanced markets in 2019 and 2020, with modest inventory builds, EIA forecasts Brent crude oil will remain lower than levels experienced during most of 2018,” the agency said.
Natural gas “EIA’s January outlook expects U.S. dry natural gas production to continue increasing significantly in 2019, building on record production during 2018. According to the forecast, growth in the Permian and Appalachian regions will drive record U.S. production over the next 24 months,” Capuano said.
EIA said it estimates an average of 90.2 billion cubic feet per day of U.S. dry natural gas production in 2019, an increase of 8.3 percent from 2018 levels, with a 2.2 percent increase projected for 2020, for an average of 92.2 bcf per day in that year.
The agency said that “expected growth in natural gas production is largely in response to improved drilling efficiency and cost reductions, higher associated gas production from oil-directed rigs, and increased takeaway pipeline capacity from the highly productive Appalachia and Permian production regions,” with that growth supported by planned expansions in liquefied natural gas capacity and increased pipeline exports to Mexico.
LNG exports are expected to increase from an estimated 3 bcf per day in 2018 to 5.1 bcf in 2019 and 6.8 bcf in 2020, “as three new liquefaction projects come online,” EIA said.
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