US crude output to rise in 2018: EIA
Houston, 10 January (Argus) — US crude production should increase by 300,000 b/d to average 9.3mn b/d in 2018, largely because of a boost in the offshore Gulf of Mexico, the Energy Information Administration (EIA) said.
It was the first time the agency included a 2018 forecast in its monthly Short Term Energy Outlook (Steo).
The EIA also increased its crude forecast for this year by about 200,000 b/d from the previous estimate. Output should average 9mn b/d in 2017, up by 100,000 b/d from 2016. The upward revision largely reflects assumptions of higher drilling activity, drilling efficiency, and well-level productivity.
The drilling rig count is set to see a steady recovery as oil prices hold above the $50/bl mark, making operations economic for many operators, especially in low cost basins like the Permian in west Texas and eastern New Mexico.
The rig count total last week rose by 7 to 665, according to Baker Hughes. The rig count has increased by some 65pc from the end-May number of 404, the lowest in at least three decades.
Gulf of Mexico production is forecast to increase by 100,000 b/d this year to average 1.7mn b/d and then increase to 1.9mn b/d in 2018, the EIA said.
The estimate reflects the anticipated expansion of several projects in 2017 and 2018 including Chevron's Tahiti field and its Big Foot and Stampede projects.
The agency also predicted that output declines in the Lower 48 states have largely ended, and production will be relatively flat in the first quarter of 2017 compared with the previous quarter, averaging 6.7mn b/d.
The EIA's price forecasts for WTI and Brent crude increased from the previous estimate.
The 2017 price estimates for WTI and Brent both rose by $1.84/bl to $52.50/bl and $53.50/bl, respectively. The 2018 price estimate for WTI is $55.18/bl and $56.18/bl for Brent.
The EIA also warned that "the values of futures and options contracts suggest high uncertainty in the price outlook."
Global economic developments and geopolitical events in the coming months have the potential to push oil prices higher or lower.
Uncertainty remains as to the effectiveness and duration of the concurrent Opec and non-Opec production cuts, part of a November agreement. In addition, the potential for continued efficiency gains and cost reductions from non-Opec producers in the new higher price environment could result in additional supply that could put downward pressure on prices, the EIA said.
The EIA forecast continues to put WTI and Brent at near parity in 2017 and 2018 with a spread of just $1/bl.
The March Brent premium to March WTI today was $1.94/bl at closing.