The Energy Information Administration cut its U.S. crude production outlook for this year and next, as lower prices reduce the number of drilling rigs
The agency reduced its forecast by 1.2 percent to 9.36 million barrels a day this year, according to its monthly Short-Term Energy Outlook. Production will still be up 650,000 barrels a day from 2014. It reduced its 2016 forecast to 8.96 million barrels a day from 9.32 million.
America’s oil drillers have sidelined more than half the country’s rigs since October as prices have tumbled. But even with less rigs, output is set to reach the highest level in more than three decades as new techniques boost the productivity of wells in shale formations from North Dakota to Texas.
“While U.S. crude oil production this year is expected to be 100,000 barrels per day less than previously forecast, oil output is still on track to be the highest since 1972,” EIA Administrator Adam Sieminski said in an e-mailed statement.
The number of active oil rigs in the U.S., while down from 1,609 in October, rose by 6 to 670 last week, the third straight weekly gain, data compiled by Baker Hughes Inc. showed.
West Texas Intermediate, the U.S. benchmark crude, will average $49.62 a barrel this year versus the July projection of $55.51, according to the report. WTI fell $1.88, or 4.2 percent, to settle at $43.08 in New York on Tuesday, the lowest close since 2009.
The EIA reduced its 2015 estimate for Brent crude, the European benchmark, to $54.40 from $60.22.
Gasoline at U.S. pumps will average $2.41 a gallon in 2015, down from last month’s estimate of $2.48.
Oil production probably began to decline in May and will continue falling into early 2016, the EIA said. Output will rebound in the second quarter of 2016, returning to an average of 9.6 million barrels during the last three months of the year.
Output from U.S. shale regions will decline by about 92,000 barrels a day next month to 5.27 million, the EIA said Monday. It’s the fifth straight month a slide is expected, after output more than tripled from 2007.
Shale producers like EOG Resources Inc. have cut spending and reduced output after oil prices fell more than 20 percent from their 2015 peak in June, and remain down by more than half from a year ago.