LOGIN JOIN SHARECAFE SIGN UP FOR OUR NEWSLETTER ADVERTISE
share cafe logo  
 
SHARECAFE COMMENTARY

US Oil Production To Break New Records
BY GLENN DYER - 12/01/2018 | VIEW MORE ARTICLES BY GLENN DYER

US crude oil production is expected to surge to more than 11 million barrels a day (mb/d) by the end of next year (2019), according to the latest forecasts from the American government on Tuesday.

If achieved, it would break previous records as higher petroleum prices trigger a drilling revival in shale fields, the Energy Information Administration’s first short-term forecast for 2019 reveals.

With global oil prices solid at the moment and expected to rise, the 11 million barrels a day forecast is ominous for the buoyant oil market and OPEC in particular which may be forced to extend is production cap past the end of 2018 and well into 2019.

That’s even with a 2.4% rise in global demand this year and 1.7% in 2019, according to the EIA.

The forecast had no impact on the oil market on Tuesday. The price of West Texas Intermediate crude in New York was $US62.67 a barrel, on Tuesday, the highest in since December 2014. Brent in London traded around $US68.55 per barrel, a new 2 ½-year high. Oil prices are up around 5% already in 2018.

The agency also sharply raised its outlook for US oil production for the coming year it now sees production averaging 10.3 million b/d, or nearly 1 mb/d more than in 2017.

The EIA said US crude oil production averaged an estimated 9.3 million barrels a day in 2017 and is estimated to have averaged 9.9 million b/d in December.

In its previous forecast, issued a month ago, the EIA saw production growth of 780,000 b/d in 2018. For 2019, EIA expects crude oil production will average 10.85 mb/d, as it rises towards the end of the year, topping 11 million barrels a day in November of next year.

Analysts say the potential for robust US production growth will be a challenge to OPEC and other leading oil exporters such as Russia, which have cut production in an effort to eliminate the worldwide glut.

“EIA estimates that Opec countries cut crude oil production output in 2017, but those cuts were offset by increased production in non-OPEC countries, especially the United States and Canada,” John Conti, EIA acting administrator, said in a statement.

Most of the growth in US output will come from the Permian basin, a huge shale region spanning western Texas and New Mexico. The EIA says it will account for two thirds, or 800,000 b/d of the 1.2 mb/d of oil production growth expected between December 2017 to December 2019.

Most of the remaining growth will come from offshore wells in the federal waters of the Gulf of Mexico, with seven new projects expected to come online by the end of 2019, the agency said.

But while output is forecast to grow strongly, so will demand for oil - the EIA also pointed to strong increases in oil demand.

Total US petroleum and other liquid fuels consumption is forecast to average 20.3 mb/d this year, up 2.4% from 2017, and rising by another 340,000 b/d, or 1.7%, in 2019.

Worldwide, the EIA sees oil consumption rising by about 1.7 mb/d in both 2018 and 2019, led by stronger demand from China and India.

And US gas production will rise - the EIA says "Dry natural gas production is forecast to average 80.4 billion cubic feet per day (Bcf/d) in 2018, a 6.9 Bcf/d increase from the 2017 level, which would be the highest year-over-year increase on record. Forecast dry natural gas production increases by an average of 2.6 Bcf/d in 2019.”

That’s bad news for the US coal industry and Donald Trump ambitions to restore coal’s fortunes. It won’t happen.

The EIA said it expects the share of US total utility-scale electricity generation from natural gas to rise from 32% in 2017 to 33% in 2018 and to 34% in 2019, as a result of low natural gas prices.

"Coal's forecast generation share falls from 30% in 2017 to slightly lower than 30% in 2018 and 28% in 2019. The nuclear share of generation was 20% in 2017 and is forecast to average 20% in 2018 and 19% in 2019. Non-hydropower renewables provided almost 10% of electricity generation in 2017, and its 2018 share is expected be similar before increasing to almost 11% in 2019.

The generation share of hydropower was more than 7% in 2017 and is forecast to be slightly lower than 7% in both 2018 and 2019.



View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



 

SHARECAFE VIDEO


Key movements in the Australian ETF market

More video   

RECENTLY ADDED TO SHARECAFE


 › ,
 › Market At Midday On Tuesday
 › Why Do We Like Codan?
 › Overnight: Steady As She Goes
 › WOW - UBS rates the stock as Neutral
 › VEA - Deutsche Bank rates the stock as Buy
 › FMG - Citi rates the stock as Neutral
 › Profit Plunges As Ore Quality Undermines Fortescue
 › Woolies Rewards Shareholders With Special Dividend
 › Trump Tariffs Pierce Hole In Ansell Outlook
 › Upbeat Outlook Despite Red Ink At Greencross
 › Tuesday At The Open
 › Marcus Today End Of Day Report
 › Monday At The Close
More ShareCafe   

GET THE SHARECAFE BREAKFAST BRIEFING


Delivered free to your inbox before the market opens each trading day. Sign up below +