OIL PRICES FORECAST: $43 - $51
According to EIA, Brent crude oil prices are forecast to average $43/barrel (b) in 2016 and $51/b in 2017. West Texas Intermediate (WTI) crude oil prices are forecast to average about $1/b less than Brent in 2016 and in 2017. The current values of futures and options contracts suggest high uncertainty in the price outlook. NYMEX contract values for January 2017 delivery traded during the five-day period ending October 6 suggest a price range from $37/b to $68/b encompasses the market expectation of WTI prices in January 2017.
Global oil inventory builds are forecast to average 0.7 million b/d in 2016 and 0.3 million b/d in 2017.
U.S. crude oil production averaged 9.4 million barrels per day (b/d) in 2015, and it is forecast to average 8.7 million b/d in 2016 and 8.6 million b/d in 2017.
After an unofficial meeting in Algeria on September 28, members of members of the Organization of the Petroleum Exporting Countries (OPEC) announced a framework agreement that could lead to a cap on OPEC crude oil production around 32.5 to 33.0 million barrels per day (b/d) in 2017. Important details of the agreement, including target outputs for individual countries, still remain to be decided and agreed upon at a regular OPEC meeting in November. Even if such a decision/agreement is actually reached, the extent of compliance with whatever targets are stated remains an important question in light of past experience. Notwithstanding the recent framework agreement, the total OPEC production forecast for 2017 of 33.0 million b/d in the October STEO is almost unchanged from the September forecast.
Increased oil production from Libya and Russia, along with the potential for reduced disruptions to Nigeria's production, and a recovery in U.S. crude oil production beginning in mid-2017 are contributing to expections of looser 2017 balances in this STEO compared with last month. In Libya, crude oil production averaged 310,000 b/d in September. However, total crude oil output reached nearly 500,000 b/d at the end of the month, following the suspension of force majeures at a number of the ports that were previosly blocked by militants aligned with the Petroleum Facilities Guard.
In Russia, recent oil production has been higher than previously forecast, with production exceeding previous records in recent months. In addition, the start-up of new fields, including Lukoil's Pyakyakhinskoye field (early September), Filanovsky field (late September), the East Messoyakha (end September), and Rosneft's Suzun (October), has resulted in a higher-than-previously-expected outlook for Russian production. EIA now forecasts Russia's oil production to increase by 190,000 b/d in 2016 and by 20,000 b/d in 2017. Previously, EIA had forecast declining Russian production in 2017.
Disrupted volumes of Nigerian crude oil are set to partially return in October as the loading schedules for Qua Iboe and Forcados crude oil streams indicate about 500,000 b/d of extra supply could return to the market.
Natural gas marketed production fell from 79.7 billion cubic feet per day (Bcf/d) in September 2015 to 76.5 Bcf/d in July 2016. EIA expects marketed natural gas production to average 77.5 Bcf/d in 2016, a decrease of 1.6% from the 2015 level, which would be the first annual decline since 2005. Forecast production increases by 3.7 Bcf/d in 2017.
Henry Hub spot prices are forecast to average $3.04/million British thermal units (MMBtu) in the fourth quarter of 2016 and $3.07/MMBtu in 2017. Natural gas futures contracts for January 2017 delivery traded during the five-day period ending October 6 averaged $3.34/MMBtu. NYMEX contract values for January 2017 delivery traded during the five-day period ending October 6 suggest a price range from $2.28/MMBtu to $4.88/MMBtu encompasses the market expectation of Henry Hub natural gas prices in January 2017.
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GAZPROM - The parties discussed relevant issues related to bilateral cooperation, including the Baltic LNG project. Emphasis was placed on the priority measures aimed at developing a joint design concept (pre-FEED).
BHGE - U.S. Rig Count is up 11 rigs from last week to 1,063, with oil rigs up 8 to 869, gas rigs up 4 to 193, and miscellaneous rigs down 1 to 1. Canada Rig Count is up 13 rigs from last week to 195, with oil rigs up 8 to 127 and gas rigs up 5 to 68.
REUTERS - Brent crude futures had risen $1.02 cents, or 1.3 percent, to $81.28 a barrel by 0637 GMT. The contract dropped 3.4 percent on Thursday following sharp falls in equity markets and indications that supply concerns have been overblown. U.S. West Texas Intermediate (WTI) crude futures were up 80 cents, or 1.1 percent, at $71.77 a barrel, after a 3 percent fall in the previous session. WTI is on track for a 3.5 percent drop this week.
EIA - Brent crude oil spot prices averaged $79 per barrel (b) in September, up $6/b from August. EIA expects Brent spot prices will average $74/b in 2018 and $75/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $6/b lower than Brent prices in 2018 and in 2019.