U.S. Cuts Oil Output Outlook as Price Drop Slows DrillingMark Shenk
The Energy Information Administration reduced its 2015 U.S. crude production outlook as tumbling prices curb drilling.
U.S. output will rise 7.4 percent to 9.31 million barrels a day this year, the EIA said today in its monthly Short-Term Energy Outlook. That’s a 10,000 barrel reduction from what the agency projected in December. Production surged 16 percent to 8.67 million last year, the most since 1986.
“U.S. crude oil production in 2015 is expected to exceed its 2014 level, but lower crude prices will slow the growth in output,” EIA Administrator Adam Sieminski said in an e-mailed statement. “Many oil companies have cut back on their exploration drilling in response to falling crude prices and will concentrate their drilling activities in established areas that already have productive wells.”
Horizontal drilling and hydraulic fracturing, or fracking, have unlocked supplies in shale formations in North Dakota, Texas and other states. The increase in output and slower demand growth pushed prices down almost 50 percent last year.
“The shale production is the price sensitive part of the U.S. production, and it will vary with the price outlook,” Howard Gruenspecht, EIA’s deputy administrator, said in a conference call. “Production is not going to be proportional to the rig count.”
West Texas Intermediate will average $54.58 a barrel this year versus the December projection of $62.75, according to the report from the Energy Department’s statistical arm. The EIA also trimmed its 2015 Brent crude estimate to $57.58 from $68.08.
WTI will climb to an average $71 a barrel next year, while Brent will rise to $75 according to the report. This is the first edition of the outlook to have 2016 forecasts.
Gasoline at U.S. pumps will average $2.33 a gallon in 2015, down 27 cents from last month’s estimate of $2.60. The average retail price fell 1.3 cents to $2.117 a gallon yesterday, the lowest since May 2009, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.
Global oil production will grow to 92.97 million barrels a day this year, up from 92.75 million in December’s outlook. The EIA reduced its forecast for global demand to 92.39 million, from 92.32 million last month.
Members of the Organization of Petroleum Exporting Countries will pump 36.13 million barrels a day this year, up 210,000 barrels a day from the December forecast, the EIA said.