OIL PRICES: $43 - $52
EIA forecasts Brent crude oil prices to average $43 per barrel (b) in 2016 and $52/b in 2017. West Texas Intermediate (WTI) crude oil prices are forecast to average about $1/b less than Brent prices in 2017. The values of futures and options contracts indicate significant uncertainty in the price outlook. The NYMEX contract values for March 2017 delivery traded during the five-day period ending December 1 suggest that a range from $34/b to $71/b encompasses the market expectation of WTI prices in March 2017 at the 95% confidence level.
Lower crude oil prices contributed to U.S. average retail regular gasoline prices in November averaging $2.18 per gallon (gal), a decline of 7 cents/gal from the October level. EIA expects gasoline prices to fall to an average of $2.10/gal in January. Retail gasoline prices are forecast to average $2.14/gal in 2016 and $2.30/gal in 2017.
Crude oil prices traded below October levels for most of November before increasing significantly on the last day of the month. West Texas Intermediate (WTI) crude oil prices increased from $46.67 per barrel (b) on November 1 to $51.06/b on December 1, while international benchmark Brent crude oil increased by $5.80/b over the same period to settle at $53.94/b. WTI and Brent average spot prices in November were $4.07/b and $4.79/b lower, respectively, than the October averages.
At their November 30 meeting, members of the Organization of the Petroleum Exporting Countries (OPEC) announced a framework for supply reductions among most of its members. Several non-OPEC producers also announced their intention to freeze or reduce production. The extent to which the announced plans will be carried out and actually reduce supply below levels that would have occurred in their absence remains uncertain. If the agreement contributes to prices rising above $50/b in the coming months, it could encourage a return to supply growth in U.S. tight oil more quickly than currently expected. Crude oil prices near $50/b have led to increased investment by some U.S. production companies, particularly in the Permian Basin. A price recovery above $50/b could contribute to supply growth in other U.S. tight oil regions and in other non-OPEC producing countries that do not participate in the OPEC-led supply reductions.
Continuing global supply growth in 2017 may postpone significant global inventory withdrawals until 2018, with the first half of 2017 showing inventory builds averaging 0.8 million b/d in our current forecast. Global inventory builds are forecast to average 0.4 million b/d for all of 2017. Despite new oil production coming online when oil inventories are at high levels globally, global economic data have been more positive than previous expectations, and increases in oil demand growth could help to support prices in the coming quarters.
The Brent crude oil price forecast for 2017 was increased by $1/b from the November STEO, with 2017 prices expected to average $52/b in the December STEO. Brent and WTI crude oil prices for the first half of 2017 are projected to remain near $50/b, with prices ending the year around $55/b. Implied volatility increased in the weeks prior to the OPEC meeting, suggesting significant uncertainty regarding both the prospects for the recent agreement and its potential implications for global oil balances.
Oil production, particularly in the United States, has been more resilient in the current oil price environment than had been expected, as reflected in improving financial conditions at oil companies. Improved profits could encourage oil producers to increase capital expenditures and expand production in 2017 and beyond, especially if oil prices increase. In the third quarter of 2016, a group of publicly traded global oil companies reported the first quarterly profit from upstream production business segments since the fourth quarter of 2014, according to recently released earnings statements from 91 companies. Collectively, the group earned almost $2.3 billion in the third quarter when front-month Brent crude oil prices averaged $47/b. In the same period in 2015, when prices averaged $51/b, the group lost $54.1 billion.
U.S. crude oil production averaged 9.4 million barrels per day (b/d) in 2015, and it is forecast to average 8.9 million b/d in 2016 and 8.8 million b/d in 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.