EIA full article on oil outlook.
The U.S. Energy Information Administration’s January Short-Term Energy Outlook (STEO) forecasts benchmark West Texas Intermediate (WTI) crude oil prices to average $52/b in 2017 and expect it to rise to $55/b in 2018.
Strong demand and the recent agreement among members of OPEC and some key non-member oil producers are putting upward pressure on crude oil prices. However, the EIA forecasts increases in global production should prevent significant price changes through 2018. Despite the recent OPEC agreement, EIA expects global petroleum and other liquid inventory builds to continue, but at a slowing rate, in 2017 and 2018.
Market reactions to the November OPEC agreement contributed to rising oil prices in December despite increasing global oil inventories and U.S. oil rig productivity.
Crude oil spot prices are expected to remain fairly flat over 2017 in part as a result of the responsiveness of U.S. tight oil production. The EIA forecasts oil prices will slowly increase in 2018 as inventory builds slow. This rise in oil prices encourages production increases, particularly in the Lower 48 onshore. However, any production increases realized while the global markets are building inventories will moderate price increases, which will in turn limit additional production increases.
Total U.S. crude oil production is estimated to have averaged 8.9 million b/d in 2016, down 0.5 million b/d from 2015, with all of the decline in the Lower 48 onshore. The EIA forecasts U.S. crude oil production will increase to an average of 9.0 million b/d in 2017 and 9.3 million b/d in 2018 on higher activity, drilling efficiency, and well-level productivity.
In its previous outlook, the EIA expected Lower 48 onshore production to decline through the end of 2017. However, the new forecast reflects crude oil prices near or above $50/b, which have led to increased investment by some U.S. production companies, particularly in the Permian Basin. EIA expects that declines in Lower 48 production have largely ended and forecasts relatively flat production in the first quarter of 2017 at 6.7 million b/d, which will then increase to an annual average of 7.0 million b/d in 2018. Even modest increases in crude oil prices could contribute to supply growth in other U.S. tight oil regions.
EIA estimates global petroleum and other liquids production will increase through the forecast. Annual estimated and forecast production levels for 2016, 2017, and 2018 were revised up to 96.4 million b/d, 97.5 million b/d, and 98.9 million b/d, respectively. More information about crude oil prices and production is available in EIA’s latest This Week in Petroleum.