top commodities - Short-term outlook for U.S. Oil in 2016: The short-term outlook for U.S. oil in 2016 may do little to pump up enthusiasm for the industry, either globally or in Louisiana.
The U.S. Energy Information Administration this week unveiled forecasts of $54 a barrel for North Sea Brent Crude in 2015, $56 a barrel in 2016. West Texas Intermediate price forecasts were $50 in 2015, $51 in 2016.
The EIA said that uncertainty stems from Iran’s re-entry into the global market and how fast they increase their production, how much demand will increase and how responsive producers outside OPEC are to low market prices.
“EIA expects non-OPEC production to grow by 1.1 million barrel a day in 2015,” EIA’s weekly report said, “and then decline by 0.3 barrels a day in 2016.”
“ U.S. crude oil production is projected to increase from an average of 8.7 million barrels a day in 2014 to 9.3 barrels a day in 2015 and then decrease to 8.8 million barrels a day in 2016,” EIA said. Factors abound for that rollercoaster ride but include “unattractive economic returns” onshore and seasonal incidents such as hurricanes.
That outlook roughly mirrors that suggested by Louisiana economist Loren Scott, who told a breakfast gathering in Lafayette last month that oil prices would rebound to about $55 in 2016, $60 in 2017. But uncertainties loom, Scott said, putting a range on oil prices that would extend from $30 to $90.
EIA’s outlook suggested a range of $35 to $66 a barrel in February, based on contracts traded in early November, and said that range could widen from $28 to $95 in December 2016.
That reluctance to drill aggressively during a time of low prices may be showing itself in Louisiana Department of Natural Resources drilling permits. DNR has recorded 511 permits through the first nine months of 2015, an average of 56 permits a month. That’s down from 1,408 permits recorded in all of 2014, an average of 117 a month.
“We’ve had a couple of weeks when there was nothing,” DNR spokesman Patrick Courreges said.
He said downturns in permit requests come gradually, which has happened over the course of 2015. Permits in 2014 dropped off more slowly from the 1,574 permit applications in 2013. He doesn’t expect an immediate turnaround.
But Courreges said things can change quickly.
“OPEC may decide to slow down its production. A pipeline may fail,” he said. “It can get better. The industry is cyclical.”
Right now, he said, the success story in Louisiana centers around oil and gas in the Lower Cotton Valley in northern Louisiana.
“If you want to keep moving product, it’s perfect,” he said. “It’s got gas, it’s got wet stuff. There is a good mix of product.”
Courreges said the industry may adjust, too, to oil in the $40 to $50 range, which he said can support the industry. It wasn’t long ago, he said, when $40 to $50 was the norm, not a low point.
Much depends on the Middle East, EIA says. It forecasts oil production to increase by 0.9 million barrels a day in 2015, led by increased production in Iraq. Look for additional production in 2016, EIA says, as Iran increases production.
“EIA assumes sanctions will ease in the second quarter of 2016. EIA forecasts Iranian crude oil supplies will increase by more than 0.2 million barrels a day in 2016, reaching 3.3 million barrels a day by the end of the year.”
The U.S. Energy Information Administration this week unveiled forecasts of $54 a barrel for North Sea Brent Crude in 2015, $56 a barrel in 2016. West Texas Intermediate price forecasts were $50 in 2015, $51 in 2016.
The EIA said that uncertainty stems from Iran’s re-entry into the global market and how fast they increase their production, how much demand will increase and how responsive producers outside OPEC are to low market prices.
“EIA expects non-OPEC production to grow by 1.1 million barrel a day in 2015,” EIA’s weekly report said, “and then decline by 0.3 barrels a day in 2016.”
“ U.S. crude oil production is projected to increase from an average of 8.7 million barrels a day in 2014 to 9.3 barrels a day in 2015 and then decrease to 8.8 million barrels a day in 2016,” EIA said. Factors abound for that rollercoaster ride but include “unattractive economic returns” onshore and seasonal incidents such as hurricanes.
That outlook roughly mirrors that suggested by Louisiana economist Loren Scott, who told a breakfast gathering in Lafayette last month that oil prices would rebound to about $55 in 2016, $60 in 2017. But uncertainties loom, Scott said, putting a range on oil prices that would extend from $30 to $90.
EIA’s outlook suggested a range of $35 to $66 a barrel in February, based on contracts traded in early November, and said that range could widen from $28 to $95 in December 2016.
That reluctance to drill aggressively during a time of low prices may be showing itself in Louisiana Department of Natural Resources drilling permits. DNR has recorded 511 permits through the first nine months of 2015, an average of 56 permits a month. That’s down from 1,408 permits recorded in all of 2014, an average of 117 a month.
“We’ve had a couple of weeks when there was nothing,” DNR spokesman Patrick Courreges said.
He said downturns in permit requests come gradually, which has happened over the course of 2015. Permits in 2014 dropped off more slowly from the 1,574 permit applications in 2013. He doesn’t expect an immediate turnaround.
But Courreges said things can change quickly.
“OPEC may decide to slow down its production. A pipeline may fail,” he said. “It can get better. The industry is cyclical.”
Right now, he said, the success story in Louisiana centers around oil and gas in the Lower Cotton Valley in northern Louisiana.
“If you want to keep moving product, it’s perfect,” he said. “It’s got gas, it’s got wet stuff. There is a good mix of product.”
Courreges said the industry may adjust, too, to oil in the $40 to $50 range, which he said can support the industry. It wasn’t long ago, he said, when $40 to $50 was the norm, not a low point.
Much depends on the Middle East, EIA says. It forecasts oil production to increase by 0.9 million barrels a day in 2015, led by increased production in Iraq. Look for additional production in 2016, EIA says, as Iran increases production.
“EIA assumes sanctions will ease in the second quarter of 2016. EIA forecasts Iranian crude oil supplies will increase by more than 0.2 million barrels a day in 2016, reaching 3.3 million barrels a day by the end of the year.”
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