For the first time since early 2015 U.S. oil production increased for the second consecutive month in November 2016. U.S. Energy Information Administration reports today that increased drilling activity in Texas and New Mexico, as well as the start of a number of new projects in the Federal Offshore Gulf of Mexico (GOM), more than offset declining production from other regions in October and November 2016.
Increased drilling in the Permian region responded relatively quickly to a rise in the WTI oil price, which increased from an average of near $30/bbl. in the first quarter of 2016 to $45/bbl. or higher beginning in the second quarter of 2016. In the GOM, the new projects that came online in the last quarter of 2016 were planned and approved during the 2012–14 period.
U.S. oil production averaged an estimated 8.9 million barrels per day in 2016, and monthly oil production increased by 232,000 b/d in October and by 105,000 b/d in November, report says. Current crude oil prices above $50/b, combined with increasing drilling rig counts in several onshore basins, suggest U.S. crude oil production will likely continue to increase, Energy Information Administration reports.
Oil supply and price spreads
Earlier in February EIA in its regular short-term energy outlook said U.S oil production is forecast to average 9.0 million b/d in 2017 and 9.5 million b/d in 2018. Total OPEC supply is expected by EIA to increase by 0.2 million b/d in 2017 and by 0.5 million b/d in 2018. EIA forecasts Brent crude oil prices to average $55/b in 2017 and $57/b in 2018. WTI prices are forecast to average about $1/b less than Brent prices in 2017.
The U.S. oil-directed rig count increased by 41 rigs in January, the eighth consecutive monthly increase and the first year-over-year increase since December 2014, according to Baker Hughes.
Prices for WTI Midland strengthened compared with similar light sweet crude oils at different delivery hubs, as represented by a decline in the WTI Cushing. Recent movements in U.S. crude oil price differentials could be reflecting infrastructure developments and changes in oil market trade flows.
Vagif Sharifov, oil and gas markets research analyst. To contact the author of the story, please write to Vagif.firstname.lastname@example.org