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EIA: March US crude at 12.1 million bpd
Short-term for April says Brent at $66 per barrel in March, up $2 from February, expected to average $65 this year, $62 in 2020
Kristen Nelson Petroleum News
U.S. crude oil production continues trending up, but the Brent spot price is expected to average $65 per barrel this year, down from $71 per barrel in 2018, the U.S. Energy Information Administration said in its latest Short-Term Energy Outlook, released April 9.
“In the April outlook, EIA increased its forecast for U.S. crude oil production in 2019 and 2020 even after lowering its forecast for Gulf of Mexico production,” said EIA Administrator Dr. Linda Capuano. “Strong growth out of Texas and New Mexico is largely behind growing U.S. crude oil production, which continues to be on pace to set new production records in three consecutive years.”
Commenting on the forecast for U.S. retail gasoline prices, expected to “average $2.76 per gallon this summer, which is down from $2.85 per gallon in 2018,” Capuano said, “The lower average price in 2019 tracks with EIA’s forecast for decreased crude oil prices.”
Prices Brent averaged $66 per barrel in March, EIA said, up $2 from February, but for the first quarter of the year Brent averaged $63 per barrel, $4 per barrel lower than the first quarter of 2018.
Despite lower Brent prices than last year at this time, March prices were $9 per barrel higher than December, “marking the largest December-to-March price increase since December 2011 to March 2012,” EIA said.
Recent price drivers include increasing crude oil supply disruptions and voluntary reductions by members of the Organization of the Petroleum Exporting Countries, the agency said, noting that recent prolonged power outages in Venezuela have “directly resulted in reduced crude oil production and exports” from that country.
There have also been mixed economic indicator signals recently, “increasing uncertainty regarding the future direction of oil prices.”
Brent is forecast to average $65 per barrel this year and $62 in 2019, compared to a 2017 average of $71 per barrel, with West Texas Intermediate expected to average $8 lower than Brent in the first half of the year, with the discount gradually falling to $4 per barrel in late 2019 and through 2020, the agency said.
US crude Estimated U.S. crude oil production for March, 12.1 million barrels per day, is up 300,000 bpd from February. EIA said it is forecasting that U.S. crude oil production will average 12.4 million bpd this year and 13.1 million bpd in 2020, with most of that production growth coming from the Permian region of Texas and New Mexico.
U.S. Lower 48 onshore crude production is forecast to average 10.5 million bpd in 2020, more than 200,000 bpd above its March forecast, EIA said.
“The higher crude oil production is the result of both higher forecast prices in 2019 that have a lagged effect on production and of data updates that increased drilling levels in the Permian Basin,” the agency said.
Gulf of Mexico offshore crude production is forecast to average 2.1 million bpd in 2020, almost 200,000 bpd below the March forecast. The net effect of the changes is a forecast up 100,000 bpd from March.
Natural gas The Henry Hub natural gas spot price averaged $2.95 per million British thermal units in March, up 26 cents from February, as a result of colder-than-normal temperatures across much of the U.S., EIA said, which increased the use of natural gas for space heating.
Henry Hub is projected to average $2.82 per million Btu this year, down 33 cents from 2018; the forecasted 2020 price is $2.77.
Dry natural gas production is forecast to average 91 billion cubic feet per day this year, up 7.6 bcf from 2018, and is forecast to continue to grow in 2020 to an average of 92.5 bcf per day.
Spot prices at the Waha Hub in West Texas, near the Permian basin, where transportation is constrained, averaged 73 cents per million Btu in March, $2.22 lower than the average Henry Hub price.
“Multiple force majeures have constrained pipeline capacity and reduced westbound flows out of the Permian, which has put downward pressure on prices,” EIA said, noting that the Waha Hub price turned negative the last week of March, and fell to a record minus $4.63 per million Btu on April 3.
“Negative prices indicate that some producers are willing to pay someone to take their natural gas to avoid the costs or penalties of storing, shutting in, or flaring their natural gas production or to lose revenue by reducing their liquids production,” the agency said.
Additional natural gas pipeline capacity out of the Permian is expected to come online later in 2019, EIA said, which should stabilize Waha Hub prices.
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