Energize Weekly, January 24, 2018
Oil and natural gas production for 2018 is projected to break records as oil prices move higher and as gas prices remain firm, according to the federal Energy Information Administration’s (EIA) short-term energy outlook.
U.S. crude oil production is forecast to average 10.3 billion barrels a day in 2018, which would mark the highest annual average production in U.S. history, the EIA said. Average production for 2017 was estimated at 9.3 billion barrels a day. The current record for production is 9.6 billion barrels a day set in 1970.
EIA forecasts production to increase to an average of 10.8 million barrels a day in 2019 and to surpass 11 million barrels a day in November 2019.
A rise in oil prices is a spur to the production as the average 2017 price for Brent crude of $54 a barrel is projected to rise to an average of $60 in 2018. On Jan. 10, Brent crude price hit $69.87 a barrel, the highest it has been since 2015. The EIA outlook said West Texas Intermediate crude oil spot prices will average $4 a barrel less than Brent in 2018 and 2019.
Dry natural gas production 2018 is projected to average 80.4 billion cubic feet a day (Bcf/d) in 2018, a 6.9 Bcf/d increase over 2017 levels, marking the highest year-over-year increase on record. The 2019 forecast is for an additional 2.6 Bcf/d of increased production.
Henry Hub natural gas spot prices are forecast to average $2.88 per million British thermal units (MMBtu) in 2018 and $2.92/MMBtu in 2019. That is down from the 2017 average price of $2.99/MMBtu.
The rising natural gas production in 2017 combined with temperatures that averaged 9 percent warmer than normal for the first three weeks of December, contributed to front-month futures prices on Dec. 21 falling to the lowest level since Feb. 2017. The Henry Hub natural gas spot price averaged $2.81/MMBtu in December, 20 cents lower than November.
The arctic temperatures that blanketed much of the country at the end of December and the beginning of January resulted in estimates of record-high demand and helped to push prices higher
Coal production increased by 45 million short tons, 6 percent, in 2017 in response to high demand for U.S. coal exports.
However, production is forecast to decline in 2018 by 2 percent, about 14 million short tons. That will be followed by another drop of 18 million short tons in 2019, as export demand slows and natural gas prices are projected to stay below $3/MMBtu during much of the forecast period, supplanting coal as a fuel for electricity generation.
Coal consumption in the electric power sector is estimated to have declined by 12 million short tons in 2017, as several coal power plants retired. As a result of coal plant retirements and low natural gas prices, coal consumption in the electric power sector is forecast to decrease by 10 million short tons in 2018 and by 27 million short tons in 2019.
