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Page added on October 13, 2016
World Oil Production In Balance, U.S. Natural Gas Production Way Down
World oil production is in balance and U.S. marketed natural gas output fell for the first time since 2005.
The EIA (U.S. Energy Information Administration) published its Short Term Energy Outlook (STEO) today. Here are the highlights.
World oil (liquids) output for September was 96.47 mmbpd (million barrels per day) and consumption was 96.39 mmbpd. That resulted in a slight surplus of 80,000 bpd, about as close to balance as it gets (Figure 1). That’s bad news considering that the Brent price of $52 per barrel acts like there are a few million bpd of surplus. So much for the global economy.
Figure 1. EIA world liquids production surplus: +0.8 mmb/d. Source: EIA October STEO and Labyrinth Consulting Services, Inc.
EIA forecasts an average production WTI price of $50/barrel in 2017 with Brent $1/barrel higher.
The long decline in U.S. crude oil production appears to be over. September output increased 60,000 bopd (Figure 2).
Figure 2. U.S. crude oil production increased 0.06 mmbod. Source: EIA October STEO and Labyrinth Consulting Services, Inc.
Natural gas marketed production fell from 3.2 Bcf/d (billion cubic feet of gas per day) in 2016 but EIA expects it will magically gain 1 Bcf/d before the year is over (I doubt that).
Natural gas production continues its decline and total supply is projected to go into deficit in December 2016 (Figure 3).
Figure 3. Natural gas supply should go into deficit by December 2016. Source: EIA October STEO and Labyrinth Consulting Services, Inc.
This is the first annual decline in gas production since 2005. But never fear–EIA projects a 3.7 Bcf/d increase in 2017.
I’m not sure where that will come from given that their gas forecast is an average price of $3.07 for 2017 and the best shale gas areas need $4 while the other plays need more like $6/mmBtu.
I guess that hedges and awesome increases in productivity explain the expected production rally.
EIA forecasts gas prices to average $3.04 for fourth quarter. Too bad the price is $3.31/mmBtu today!
This Photograph taken on October 4, 2016 shows Storage tanks of an Indian Oil Refinery of Essar Oil at Vadinar village, near Jamnagar, some 380 kms. from Ahmedabad. According to ‘ Business Standard ‘ In a bid to expedite Rosnefts acquisition of 49 per cent stake in Essar Oil, the legal teams of the Ruias of Essar Group and Russian oil major Rosneft are meeting later this week to sort out issues raised by Indian banks on the impact of US sanctions on Russian companies. Essar Oil is an India-based company engaged in the exploration and production of oil and natural gas, refining of crude oil, and marketing of petroleum products. AFP PHOTO / / AFP / SAM PANTHAKY (Photo credit should read SAM PANTHAKY/AFP/Getty Images)
Art Berman
Petroleum Geologist and Professional Speaker
Visit my website for more information: artberman.com
6 Comments on "World Oil Production In Balance, U.S. Natural Gas Production Way Down"
tita on Fri, 14th Oct 2016 2:55 am
US crude oil production increasing in the coming months? LTO is going to decrease for 4 months at least (not enough drilling) for another 400kb/d. This increase can only come from DW coming online.
The weekly petroleum reports (from eia) tells that august production was 8.52 Mb/d (8.34 in STEO) and sept was 8.48Mb/d (8.4 in STEO).
I think this is very early to make the conclusion that sept is a turnaround US oil production.
shortonoil on Fri, 14th Oct 2016 9:21 am
If oil production is now in balance why is there still historical all time inventories. Another Forbes example of serious cognitive disconnect! The industry is now having a fire sale to dump reserves that they can’t, and have no intention of replacing. The writing is on the wall with a 6″ brush, and they want us to ignore it. Do so at your own risk.
http://www.thehillsgroup.org/
Rockman on Fri, 14th Oct 2016 9:27 am
tita – So true about DW GOM:
“U.S. oil production in the deep waters of the Gulf of Mexico is on the rise and on track to reach a record high in 2017, according to the Energy Information Administration. That’s despite the enormous costs associated with drilling for oil at depths of nearly two miles and the dramatic decline in oil prices that has caused overall U.S. oil output to decline in recent months.”
And why:
“But deepwater projects require enormous lead times, making them far less flexible than shale oil fields — some of which have been shut down due to cheap oil. By comparison, many of the Gulf of Mexico’s newly-completed projects and those in the works were discovered and planned years before the oil crash.
“If you’ve already spent $5 billion on a $7 billion project, it’s not like you can say, ‘Never mind, let it sit and wait,'” said Tom Kloza, global head of energy analysis at the Oil Price Information Service.”
Rockman on Fri, 14th Oct 2016 9:41 am
“The industry is now having a fire sale to dump reserves…” The industry hasn’t “dumped” one bbl of oil reserves. Companies are buying/replacing PROVED PRODUCING OIL RESERVES at a lower cost then they’ve been able to for more then a decade.
Lots of companies have taken a hit…including a fatal one in many cases. OTOH other companies are acquiring $billions of reserves they’ll make a decent profit with oil at $40/bbl. Takes some of the sting off the pain lower prices have brought.
And another silver lining about those lower oil prices: wells now being drilled have seen a big increase in EROEI…perhaps as high as 2X.
yoshua on Fri, 14th Oct 2016 10:36 am
Rockefeller is now into ERoEI ? What is going on ? The end is nigh ? 🙂
rockman on Fri, 14th Oct 2016 2:58 pm
yoshua – I only take time to mention EROEI to irritate all those who have argued that the EROEI was on a continuous decline. Folks who have had difficulty understand the relationship between the price of oil, EROEI and how drilling investment decisions are made. IOW EROEI is only of interest to the Rockman when he can use it as a sharp stick to poke some eyes with. LOL.