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Wednesday, March 11, 2015
The Energy Information Administration (EIA) just released its Short-term Energy Outlook (STEO) report and its estimates for crude prices are not much different than what the industry is currently posting for per barrel prices, although supplies of crude are up.
According to comments released by EIA Administrator Adam Sieminski on this most recent report,“U.S. commercial crude oil inventories, which are already at the highest level since 1930, are expected to continue growing over the next two months.”
“The increase in oil inventories is expected to moderate as refineries ramp up their processing of crude oil into petroleum products in Q2 and domestic oil production slows. US crude oil storage capacity is now 62% full compared with 48% a year ago.”
EIA forecasts that Brent crude oil prices will average $59 per barrel in 2015and $75 per barrel in 2016. West Texas Intermediate (WTI) prices in 2015 and 2016 are expected to average $7 and $5 per barrel, respectively, below Brent. The current values of futures and options contracts continue to suggest very high uncertainty in the oil price outlook, although WTI futures contracts for June 2015 delivery traded during the five-day period ending March 5 averaged $54 per barrel.
According to the STEO the US is seeing crude production rates close to what was seen in 1970, with production averaging 9.4 million bpd in February, just a couple hundred thousand less than Saudi Arabia’s production flows. Given EIA’s price forecast and the actual price of crude, production will most certainly be reined in. The EIA projects US production will average 9.3 million bpd in 2015 and 9.5 million bpd in 2016, close to the 9.6 million highest annual average level of US production in 1970.
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