The Energy Information Administration’s (EIA) Drilling Productivity Report, a monthly breakdown on production by basins, typically forecasts production increases across the United States’ seven most prolific plays. The latest edition, released on March 9, 2015, projects production in April to be higher than the current month.
However, that increase has slowed dramatically.
Production for March is forecasted at 5,613 MBOPD and 45,932 MMcf/d, while April is projected to be 5,614 MBOPD and 46,153 MMcf/d – increases of just 1 MBOPD and 221 MMcf/d, respectively. Out of the four major oil plays (Bakken, Eagle Ford, Niobrara and Permian), only the Permian is expected to increase its volume in April. The “other” three oil fields are projected to lose 23 MBOPD (24.5 MBOEPD, including gas) of volume next month.
With domestic production seemingly losing steam, market analysts like John Kemp of Reuters published an article titled “OPEC is winning its Battle with U.S. Shale.” The EIA has trimmed its production estimates for the last two months.
Meanwhile, the future prices for Brent were revised upward in the Administration’s Short Term Energy Outlook. The forecasted 2015 average price for Brent was bumped up to $59 from its previous estimate of $57, and prices are expected to reach $75 in 2016. West Texas Intermediate (WTI) is expected to be $52 and $70 in 2015 and 2016, respectively, down from February’s estimate of $55 and $71. The EIA is also expecting the 2015 WTI/Brent spread to widen, with the newest forecasts expanding to $7 from its previous estimate of $3.
“The Brent-WTI spread for 2015 is more than twice the projection in last month’s STEO, reflecting continuing large builds in U.S. crude oil inventories, including at the Cushing, Oklahoma storage hub,” the report says. The U.S. had added approximately 56 MMBO to its inventories in the last seven weeks, placing total storage utilization at all-time highs. Analysts polled by Bloomberg expect another 4.7 MMBO to be added to storage in the next crude inventory report, scheduled for release on March 11.
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