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EIA projects falling crude oil prices Energy Information Administration’s January Short-Term Energy Outlook projects Brent at $105 this year, down from $112 in 2012 Kristen Nelson Petroleum News
The U.S. Energy Information Administration is projecting that the Brent crude oil spot price will average $105 per barrel this year, down from $112 per barrel in 2012, with a further drop to $99 per barrel forecast for 2014, reflecting increased production from non-Organization of the Petroleum Exporting Countries.
The discount of West Texas Intermediate crude oil to Brent, which averaged $18 per barrel last year, is projected to be $16 per barrel this year and $8 in 2014 because of planned new pipeline capacity which will lower the cost of moving oil from the Midcontinent to the Gulf Coast, EIA said.
WTI averaged $94 last year and EIA expects it to average $90 this year, increasing to $91 in 2014.
U.S. crude oil production, which averaged 6.4 million barrels per day last year, an increase of 800,000 bpd from 2011, averaged 7.3 million bpd this year and is expected to increase to 7.9 million bpd in 2014, “which would mark the highest annual average level of production since 1988,” EIA said.
“Central to this projected growth will be ongoing development activity in key onshore basins,” with drilling in tight oil plays in the Williston, Western Gulf and Permian “expected to account for the bulk of forecast production growth over the next two years.”
Non-OPEC growth up Continued growth in U.S. tight oil and Canadian oil sands production accounts for about two-thirds of the expected increase in non-OPEC production growth, projected to grow by 1.4 million bpd this year and by 1.3 million bpd in 2014.
OPEC members are expected to continue to produce at least 30 million bpd over the next two years, EIA said,
OPEC surplus capacity, concentrated in Saudi Arabia, was at 2.3 million bpd in December, “relatively tight by historical standards,” and is expected to increase to 3.1 million bpd this year.
As U.S. production increases, net liquid fuel imports, including crude oil, have been falling.
U.S. net liquid fuel imports peaked at 12.5 million bpd in 2005, EIA said, declining to 7.5 million bpd in 2012, and are expected to decline to an average of 6 million bpd by 2014.
The share of total U.S. consumption met by net liquid fuel imports peaked at more than 60 percent in 2005 and fell to an average of 40 percent in 2012, EIA said, and is expected to average 32 percent in 2014 “because of continued substantial increases in domestic crude oil production.”
U.S. natural gas Despite relatively low natural gas prices — which averaged $3.34 per million Btu at the Henry Hub in December, and are expected to average $3.74 per million Btu next year (compared to $2.75 in 2012) and $3.90 in 2014 — EIA said domestic natural gas production is expected to grow, “driven largely by onshore production in shale areas.”
Production has been rising despite a decrease in the natural gas rig count, which Baker Hughes pegged at 431 on Dec. 28, compared with 811 at the start of the year. EIA said the oil rig count has also declined in recent months, although that decline has been smaller.
“The declines in rig counts, coupled with continued production growth, suggest increases in rig efficiency, which will maintain production levels going forward,” EIA said.
Domestic production is continuing to replace pipeline imports from Canada and liquefied natural gas imports, and EIA said it expects gross pipeline imports to stay flat this year, while LNG imports are expected to stay at minimal levels, since higher prices for LNG have made the U.S. a market of last resort.
U.S. inventories of working natural gas in storage remain at high levels after setting an all-time weekly record in November, EIA said, with withdrawals limited so far this winter because of warmer-than-normal December temperatures.
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