U.S. Oil Production Growth is slowing

[dan_s]

STEO Highlights: US oil growth slows as records break
in Oil & Companies News 12/12/2019

US oil output will continue to break records into 2020, but the pace of growth will slow significantly in comparison to recent years, the US Energy Information Administration said Tuesday.

“Slowing crude oil production growth results from a decline in drilling rigs over the past year that EIA expects to continue into 2020,” EIA said in its Short-Term Energy Outlook. “Despite the decline in rigs, EIA forecasts production will continue to grow as rig efficiency and well-level productivity rises, offsetting the decline in the number of rigs.”

In the report, EIA forecasts US oil output to cross 13 million b/d in January, up from 11.86 million b/d in January 2019. In last month’s STEO, EIA forecast that the US would cross the 13 million b/d market two months earlier.

EIA forecasts US oil production to average 12.25 million b/d in 2019 and 13.18 million b/d in 2020, 40,000 b/d and 110,000 b/d, respectively, below last month’s forecast.

By December 2020, EIA forecasts US oil output to average 13.28 million b/d, an increase of 290,000 b/d from December 2019, a significant decline in year-over-year growth compared to the past three years. By comparison: US oil output increased by 950,000 b/d from December 2018 to December 2019; 2.07 million b/d from December 2017 to December 2018; and 1.17 million b/d from December 2016 to December 2017. < Per EIA's own 941 report (based on state reports) U.S. oil production was 12,463,000 barrels per day in September, 2019. So, to get to 13,280,000 BOPD in December is a jump of 817,000 BOPD in just three months when the active rig count is 25% lower year-over-year. That would be a pretty remarkable spike in production considering that U.S. production only increased 403,000 BOPD from June to Sept when we were completing a lot more wells. Does it make sense to any of you that the rate of U.S. production growth would double in the last quarter of the year when the active rig count is dropping like a rock??? .

EIA expects US crude output to account for about two-thirds of total global liquids growth in 2020. Total world production is expected to average 102.29 million in 2020, up from 100.83 million b/d in 2019. Global demand will average 102.14 million b/d in 2020, up from 100.72 million b/d in 2019. < MY TAKE: This will not happen unless there is an increase of 150 active rigs and that will only happen if there is a significant increase in oil price.

OPEC

**EIA forecasts OPEC oil production to average 29.81 million b/d in 2019 and 29.3 million b/d in 2020, 10,000 b/d above and 220,000 b/d below, respectively, last month’s forecast.

**OPEC, Russia and nine other allies announced last week that they will deepen collective output cuts by 503,000 b/d to 1.7 million b/d from January through March.

**”EIA assumes the production cuts from OPEC and Russia will remain in place through the end of the forecast period in 2020,” EIA said. “With production restraint from most OPEC members, continuing sanctions on Iran, and ongoing declines in Venezuela’s crude oil production, EIA expects OPEC production to fall in 2020. However, EIA forecasts that increased non-OPEC production will more than offset those declines and that global liquid fuels supply will rise by 1.5 million b/d in 2020.”

**Saudi oil output averaged 9.9 million b/d in November, up 50,000 b/d from October and its highest level of production since June, when it averaged 10 million b/d.

**Venezuela oil output averaged 700,000 b/d in November, up from 650,000 b/d in October, EIA said.

PRICES

**EIA forecasts WTI spot prices to average $56.74/b this year and $55.01/b next year, an increase of 29 cents/b and 41 cents/b, respectively, from last month’s forecast. < There will NOT BE AN INCREASE IN THE ACTIVE RIG COUNT AT $55 OIL PRICE.

**EIA forecasts Brent spot prices to average $63.93/b in 2019 and $60.51/b in 2020, up 34 cents/b and 41 cents/b, respectively, from last month.

**EIA said it expects downward prices pressures to be concentrated in the first half of next year, due to a forecast increase in global oil inventories. Prices are forecast to rise in the second half of next year due to forecasted global oil inventory draws, the agency said.

**”Some upward price pressures could emerge in the second half of the year as global oil demand growth is expected to recover on the back of a modest acceleration in global economic growth,” EIA Administrator Linda Capuano said in a statement.

**EIA forecasts WTI spot prices to average $59.50/b by December 2020 and Brent spot prices to average $65/b by December 2020.
Source: Platts