USA OIL 2015 - 16
Liquid Fuels Supply
U.S. crude oil production is projected to increase from an average of 8.7 million b/d in 2014 to 9.4 million b/d in 2015 and then decrease to 9.0 million b/d in 2016. The forecast is about 0.1 million b/d lower and 0.4 million b/d lower for 2015 and 2016, respectively, than in July's STEO. The decrease in the crude oil production forecast reflects a lower oil price outlook that will reduce expected oil-directed rig counts and drilling and well-completion activities throughout the forecast period.
EIA estimates that U.S. crude oil production averaged 9.5 million b/d in the first half of 2015. This level is 0.3 million b/d higher than the average production during the fourth quarter of 2014, despite an almost 60% decline in the total U.S. oil-directed rig count since October 2014. The most recent production estimates indicate U.S. crude oil output was 9.5 million b/d in May. EIA estimates that total U.S. production was unchanged in April and began declining in May, falling 180,000 b/d from the April level. Some of this decline reflects outages in the Gulf of Mexico that are expected to be temporary. The decrease in total production was preceded by declines in onshore production, which began in April.
EIA expects U.S. crude oil production declines to continue through the third quarter of 2016, when total crude oil production is forecast to average 8.8 million b/d. Forecast production begins rising in late 2016, returning to an average of 9.1 million b/d in the fourth quarter. A total of 13 projects are scheduled to come online in the Gulf of Mexico in 2015 and 2016, pushing up Gulf of Mexico production from an average of 1.4 million b/d in the fourth quarter of 2014 to more than 1.6 million b/d in the same period of 2016.
Expected crude oil production declines from May 2015 through the third quarter of 2016 are largely attributable to unattractive economic returns in some areas of both emerging and mature onshore oil production regions, as well as seasonal factors such as anticipated hurricane-related production disruptions in the Gulf of Mexico. Reductions in 2015 cash flows and capital expenditures have prompted companies to defer or redirect investment away from marginal exploration and research drilling to focus on core areas of major tight oil plays. Reduced investment has resulted in the lowest count of oil-directed rigs in nearly five years and well completions that are significantly behind 2014 levels.
Oil prices, particularly in the second quarter of 2015, remained high enough to support continued development drilling in the core areas of the Bakken, Eagle Ford, Niobrara, and Permian basins, with July showing the first month-to-month increase in the oil-directed rig count since October 2014. However, the recent fall in crude oil prices and lowered outlook for oil prices over the forecast period are expected to prolong and deepen onshore production declines. Lower crude oil prices are anticipated to slow the rate of recovery in onshore drilling activities and well completion totals, despite continued increases in rig and well productivity and falling drilling and completion costs. The forecast remains sensitive to actual wellhead prices and rapidly changing drilling economics that vary across regions and operators.
While projected oil production in the Gulf of Mexico rises during the forecast period, Alaska oil production falls. Production in these areas is less sensitive to short-term price movements than onshore production in the Lower 48 states and reflects anticipated growth from new projects and declines from legacy fields.
HGL production at natural gas processing plants reached a record level of 3.31 million b/d in April 2015, and it is projected to average 3.28 million b/d in 2015 and 3.53 million b/d in 2016. EIA expects higher ethane recovery rates in 2016 following planned increases in petrochemical plant feedstock demand. Export terminal expansions will allow for higher quantities of domestically produced ethane, propane, and butanes to reach the international market.
U.S. petroleum product gross exports continue to grow, up almost 0.5 million b/d (13%) in the first five months of 2015 compared with the same period in 2014. More than half of the growth in liquid fuel exports came from HGL. The increase in refined product exports, combined with the growth in domestic liquid fuels consumption, contributed to U.S. refinery utilization rates averaging 89.9% over the first five months, up from 88.1% last year and the highest rate for this period since 2005. Gross inputs to U.S. refineries exceeded 17 million b/d in each of the last four weeks of July, a level that had not previously been reached or exceeded in any week since EIA began publishing the data in 1990.
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