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EIA ups 2018 US crude forecast to 10.3mn b/d

9 Jan 2018, 6.11 pm GMT

EIA ups 2018 US crude forecast to 10.3mn b/d

Houston, 9 January (Argus) — The Energy Information Administration (EIA) increased its 2018 US crude production forecast by 2.6pc to 10.27mn b/d.

The 2018 forecast would be the highest in US history, exceeding the previous record of 9.6mn b/d set in 1970, according to the agency's monthly Short-Term Energy Outlook (STEO).

The EIA also said that US crude production would continue to rise in 2019 to average 10.85mn b/d, reaching above 11mn b/d in the fourth quarter of that year. This was the first STEO which included the 2019 forecast.

The production increase will mostly come from the Permian basin in west Texas and eastern New Mexico where output should rise by about 900,000 b/d to 3.6mn b/d by December 2019.

The Permian is booming amid growing interest in moving light crude to the US Gulf coast for export by way of several large pipeline projects in the works to increase takeaway capacity.

In the Permian's large geographic area and stacked plays, operators can continue to develop multiple tight oil layers and increase production even with sustained prices lower than $50/bl, the EIA said.

The agency also said that some of the projected crude output increase in the next two years — about 300,000 b/d — will come from the offshore Gulf of Mexico as seven new projects are expected to come online by the end of 2019.

The agency forecast that ICE Brent spot prices will average about $4.40/bl higher than WTI prices in 2018. The Brent-WTI price spread widened significantly in recent months to $5-$6/bl, first spurred by the effects of Hurricane Harvey and later by a shutdown of the Forties Pipeline System. But the spread has persisted even as those circumstances normalized.

The March Brent-March WTI spread was $6.06/bl yesterday at closing.

The EIA increased its 2018 spot price estimates for both benchmarks with WTI up by 4.8pc to $55.33/bl and Brent up by 4.3pc to $59.74/bl, according to the STEO.

The price estimates for 2019 are $61.43/bl for Brent and $57.43/bl for WTI.

The wider spread between the two benchmarks has helped spur US oil exports.

US crude exports in November averaged 1.53mn b/d with Canada and China as the top two destinations, according to the most recent trade data from the Census Bureau.

The EIA separately estimates weekly oil exports. The agency said in its most recent update that US crude exports averaged 1.47mn b/d in the week ended 29 December.

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