In its most recent Short-Term Energy Outlook, the US Energy Information Administration forecasts US crude oil production to average 9.2 million b/d this year and average 9.7 million b/d in 2018. Both totals are 200,000 b/d higher than in EIA’s previous STEO forecasts.
According to the agency, the higher forecast reflects improvements to forecasting methodology for rig efficiencies and an expectation of a more-rapid increase in drilling and completion activity, particularly in the Permian basin. Additionally, a faster expected ramp-up in projects that started in 2016—such as the Thunder Horse South Expansion—contributes to higher forecast production in the federal offshore Gulf of Mexico.
EIA estimates that global oil inventories fell at a rate of almost 1 million b/d in February, which would be the third-largest monthly decline since the start of 2014. Global economic activity continues to be robust and is supporting oil consumption growth.
However, the oil market’s outlook remains uncertain because of supply developments. While supply from non-OPEC countries in this year’s second quarter is expected to be close to its level from fourth-quarter 2016, OPEC supply is forecast to decline during the same period. Lower OPEC market share could complicate whether its members will renegotiate voluntary supply reductions for this year’s second half. EIA expects increases in non-OPEC supply, particularly in the US, to limit upward oil price pressure through much of this year.
EIA forecasts Brent crude oil spot prices to average $55/bbl in 2017 and $57/bbl for 2018, which is unchanged from EIA’s February STEO.
Natural gas prices
Mild weather prevailed across much of the Lower 48 states in February, and initial data indicate that heating degree days were the lowest on record for the month. The warm temperatures contributed to downward pressure on natural gas prices.
EIA forecasts the Henry Hub natural gas spot price to average $3.03/MMbtu in 2017 and $3.45/MMbtu in 2018. These forecasts are 40¢/MMbtu and 25¢/MMbtu lower, respectively, than expected in last month’s STEO. The lower price forecast reflects mild winter temperatures that have reduced gas use for space heating, which has contributed to gas inventory levels being higher than previously expected for the end of February.
In addition, EIA forecasts LNG exports to average 1.8 bcfd in 2017 and 2.8 bcfd in 2018. This forecast is 0.4 bcfd and 0.2 bcfd higher, respectively, for those years than previously forecast. This revision is based on updates to commercial in-service dates and ramp-up periods of LNG facilities currently under construction.
