WASHINGTON, D.C. – Average crude oil production in the Lower 48 states fell to 8.39 MMb/d in 2016, a decrease of around 0.55 MMb/d, or 6.1% from the 2015 average, according to the US Energy Information Administration’s (EIA) most recent Monthly Crude Oil, Lease Condensate, and Natural Gas Production Report.
The administration found that the largest increase in production was in theGulf of Mexico, which increased 96,000 b/d (35 MMbbl) from 2015 to 2016 as new projects, which were planned in 2012-14, began to come online. The largest production decline on a percentage basis occurred in the Federal Offshore Pacific, where production declined 44% in 2015, due in part to a pipeline disruption in May 2015.
The production report collects monthly oil and natural gas production data from a sample of operators in 15 states, the Federal Offshore Gulf of Mexico, and collectively from the remaining states and the Federal Offshore Pacific. The survey covers roughly 90% of crude oil and natural gas production in the Lower 48.
After declining throughout 2015, crude oil and natural gas prices began to recover in 2016, increasing through much of the year, which drove production increases in the second half of 2016. The price for WTI crude oil, after reaching a monthly low of $30/bbl in February 2016, began to increase in March and most recently averaged $53/bbl in January 2017.
Natural gas and crude oil prices are expected to increase in 2017 and 2018, as the agency covered days ago in a separate report, its Short-Term Energy Outlook (STEO).
US crude oil production averaged an estimated 8.9 MMb/d in 2016 and is forecasted to raise an average 9.2 MMb/d in 2017 and 9.7 MMb/d in 2018. Brent crude oil spot prices averaged $55/bbl in February, largely unchanged from the average in January.
EIA forecasts Brent crude oil prices to average $55/bbl in 2017 and $57/bbl in 2018. WTI prices are expected to average about $1/bbl less than Brent prices in the forecast.
Implied global petroleum and liquid fuels inventories increased by an estimated 0.5 MMb/d in 2016. EIA also wrote in its March STEO that it expects a relatively balanced oil market in the next two years, with inventory builds averaging 0.1 MMb/d in 2017 and 0.2 MMb/d in 2018.
It also said that the oil market is showing signs of closer balance between supply and demand in early 2017. Although estimates of January and February crude oil production will remain unconfirmed for another month or two, voluntary oil supply reductions by members of the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers (following agreements in late 2016) appear to be achieving a high degree of compliance.
EIA estimates that global oil inventories fell at a rate of almost 1 MMb/d in February, which would be the third-largest monthly decline rate since the beginning of 2014. Global economic activity continues to remain robust and is supporting oil consumption growth.
However, EIA found in the STEO that the outlook for the oil market remains uncertain because of supply developments. While supply from non-OPEC countries in 2Q 2017 is expected to be close to its level from 4Q 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 the second half of 2017. EIA expects increases in non-OPEC supply, particularly in the US, to limit upward oil price pressure through much of 2017.