U.S. Cuts Oil Price Forecast for 2015 to $62.75 a Barrel

-- The U.S. Energy Information Administration cut its crude price forecasts by $15 a barrel after OPEC’s decision last month to maintain output as North American oil output increases. The agency reduced its 2015 U.S. oil production outlook for a second month.

West Texas Intermediate will average $62.75 a barrel in 2015 versus the November projection of $77.75, the EIA said today in its monthly Short-Term Energy Outlook. The agency trimmed its Brent crude estimate for next year to $68.08 from $83.42.

Prices have tumbled since the 12-nation Organization of Petroleum Exporting Countries decided Nov. 27 to maintain output levels, letting prices decrease to a level that may slow U.S. production growth. The decline in prices will start to affect U.S. production next year, EIA Administrator Adam Sieminski said in an e-mailed statement.

“U.S. oil production growth is expected to slow next year in response to lower crude process, but annual output is forecast to still increase to the highest level since 1972,” Sieminski said.

The Energy Department’s statistical arm said U.S. production will rise to 8.6 million barrels a day this year and 9.32 million in 2015, up from 7.44 million last year. The 2015 forecast is down from last month’s estimate of 9.42 million.

Horizontal drilling and hydraulic fracturing, or fracking, have unlocked supplies in shale formations in North Dakota, Texas and other states. The increase in global output and slower demand growth has pushed prices down from their June highs.

Drilling Impact

“Continued lower oil prices will make some drilling activity less profitable in both emerging and mature U.S. production areas,” Sieminski said. “However, oil prices are expected to remain high enough in 2015 to support new drilling in the major shale areas in North Dakota and Texas, which account for most of the growth in U.S. production.”

WTI will average $93.82 a barrel this year, down from last month’s projection of $95, the report showed. Brent is forecast to average $99.54 this year, lower than the previous estimate of $101.04.

Global oil demand will rise to 92.32 million barrels a day next year, down from 92.5 million forecast last month. This year’s demand prediction is 91.44 million.

Oil production outside of the Organization of Petroleum Exporting Countries will rise 840,000 barrels a day to 56.84 million next year, down from the November forecast of 56.98 million. The 2014 projection was cut 30,000 barrels a day to 56 million.

OPEC Barrels

“This is not a bullish report,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “They revised demand 180,000 barrels a day lower, while non-OPEC production was cut just 140,000 barrels. The result of this is the call for OPEC crude is being reduced.”

OPEC members will pump 35.92 million barrels a day next year, down 10,000 barrels from last month’s projection. The 12-member group will pump 35.96 million barrels a day this year, up 40,000 barrels from the November outlook.

U.S. oil consumption is forecast to climb to 19.1 million barrels a day in 2015, up from 19.07 million projected in November. This year demand will average 18.96 million.

Demand for gasoline in the U.S. is projected to rise to 8.86 million barrels a day next year, up from last month’s estimate of 8.83 million. Consumption of the fuel is expected to average 8.89 million in 2014, up from the previous forecast of 8.85 million.

Gasoline at U.S. pumps will average $2.60 a gallon in 2015, down 34 cents from last month’s estimate of $2.94.

“U.S. gasoline prices are on track to fall to their lowest level for December in five years,” Sieminski said. “The savings at the pump will continue for U.S. drivers in 2015, when annual gasoline costs for the average household are expected to fall below $2,000, about $550 less than this year.”

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