JAKARTA (TheInsiderStories) – United States’ (US) Energy Information Administration (EIA) raised its forecasts for the country and global benchmark crude prices this year, The agency also lifted its 2019 and 2020 expectations for US crude production, according to its Short-term Energy Outlook report released Tuesday (04/09).
The EIA forecasts 2019 US crude production of 12.39 million barrels a day, up 0.7 percent from the March forecast. It also raised its 2020 output view by 0.5 percent to 13.1 million barrels a day.
For the 2019 summer driving season that runs from April through September, EIA forecasts that US regular gasoline retail prices will average $2.76 per gallon (gal), down from an average of $2.85/gal last summer. The lower forecast gasoline prices primarily reflect EIA’ expectation of lower crude oil prices in 2019.
For all of 2019, EIA expects US regular gasoline retail prices to average $2.60/gal and gasoline retail prices for all grades to average $2.71/gal, which would result in the average US household spending about $100 (4 percent) less on motor fuel in 2019 compared with 2018.
EIA also lifted its Brent crude oil spot prices averaged $66 per barrel (bbl) in March, up $2/b from February 2019. Brent prices for the first quarter of 2019 averaged $63/bbl, which is $4/bbl lower than the same period in 2018.
Despite lower crude oil prices than last year, Brent prices in March were $9/bbl higher than in December 2018, marking the largest December to March price increase from December 2011 to March 2012. EIA forecasts Brent spot prices will average $65/bbl in 2019 and $62/bbl in 2020, compared with an average of $71/bbl in 2018.
While for West Texas Intermediate (WTI) crude oil prices, EIA expects will average $8/bbl lower than Brent prices in the first half of 2019 before the discount gradually falls to $4/bbl in late-2019 and through 2020.
The agency estimates that US crude oil production averaged 12.1 million barrels per day (bpd) in March, up 300,000 bpd from the February average. The US crude oil production will average 12.4 million bpd in 2019 and 13.1 million bpd in 2020, with most of the growth coming from the Permian region of Texas and New Mexico.
This forecast puts the US back on track to reach the 13 million bpd milestone by the second quarter of 2020. The country has overtaken Saudi Arabia and Russia to become the world’ biggest oil producer, thanks to a shale revolution.
“Strong growth out of Texas and New Mexico is largely behind growing US crude oil production, which continues to be on pace to set new production records in three consecutive years,” said EIA Administrator Linda Capuano.
However, production growth has slowed in recent months as a price crash in the fourth quarter forced US producers to curb spending and cut back on drilling plans. Still, majors Exxon Mobil Corp., and Chevron Corp., are expanding in Texas’ Permian region. Major oil companies plan to spend about 16 percent more on US drilling and completions in 2019 versus last year. While, independent producers expect to spend about 11 percent less in 2019, financial services firm Cowen & Co said.
The increase in US crude oil production will certainly affect the current high oil price fluctuations, supported by supply cuts led by the producer club of the Organization of the Petroleum Exporting Countries (OPEC).
The US sanctions against Iran and Venezuela also contributed to the rise in oil prices, although brokers said the market saw the increase was hampered by an increase in US oil. In addition, the threat of the US in the form of imposing tariffs on hundreds of European products also held back a rally in global capital markets, which also dragged oil futures prices.
Price fluctuations are predicted to continue amid Russian signals that are likely to re-hoist production after the production cut agreement with OPEC ends. Russia is a non-OPEC country participating in an agreement to cut production by 1.2 million b/d for six months since January 2019.
In addition, the International Monetary Fund (IMF) decision to cut the world economic growth forecast in 2019 from 3.5 percent in January to 3.3 percent will have an impact on oil futures prices. Moreover, the IMF also revealed that global economic growth could be further dragged down by the tension of trade and the potential of the British’s exit from the European Union.
Written by Lexy Nantu, Email: email@example.com