The U.S. Energy Information Administration (EIA) on Tuesday released its Short-Term Energy Outlook (STEO) for March with the not completely stunning news that U.S. crude oil production averaged 10.3 million barrels of crude oil a day last month, up by 230,000 barrels from the January total. In 2017, U.S. crude production averaged 9.3 million barrels a day for the entire year.
For all of 2018, the EIA estimates U.S. crude production will average 10.7 million barrels a day. If that happens, 2018 will surpass the 1970 record annual average production of 9.6 million barrels a day. For 2019, the EIA is forecasting U.S. production to average 11.3 million barrels a day.
Worse news is in store for OPEC and its partners like Russia that have shaved crude oil production by 1.8 million barrels a day and whittled global inventories by half. According to the EIA, global inventories of petroleum and other liquid fuels declined by 600,000 barrels a day last year. The agency sees global inventories rising by 400,000 barrels a day this year and a further 300,000 barrels in 2019.
West Texas Intermediate (WTI) crude oil prices are forecast to rise from an average of $50.79 a barrel in 2017 to $58.17 this year before moderating to $57.51 in 2019. Prices for Brent crude are forecast to be about $4 a barrel higher for both this year and next.
After reaching a peak differential of about $7 a barrel with Brent in late December, WTI was priced just $3 a barrel below Brent on March 1.
The STEO also notes that natural gas pricing is under pressure and that the probability that July 2018 futures will move above $3 per million BTUs fell to 28% on March 1. Natural gas for April delivery traded at around $2.75 in the noon hour Tuesday.
WTI crude oil for April delivery opened about flat Tuesday at $62.59 a barrel and recently traded down about 0.2% at $62.46. The January 2019 futures contract traded at $58.49, reflecting traders’ concerns that rising U.S. production will keep downward pressure on prices well into the future.