EIA sharply lowers US crude production forecasts

The Energy Information Administration (EIA) lowered its US crude production forecasts for 2020 and 2021 by 9.5pc and 13pc respectively, as producers voluntarily cut output because of plummeting demand caused by Covid-19 related travel restrictions.

US crude output will average 11.76mn b/d this year, a 9.5pc drop from the previous forecast of 13mn b/d, according to the agency's monthly Short Term Energy Outlook. Domestic production will average 11mn b/d in 2021, down by nearly 13pc from the previous forecast.

This year, the EIA expects US crude production to drop below 12mn b/d in the current quarter and end the year at 11mn b/d.

Most US producers have announced spending cuts after WTI and Brent benchmark crude prices crashed last month after the dissolution of an Opec-led production cut agreement. Oil prices hit 18-year lows in recent weeks as the coronavirus pandemic exacerbated the price decline.

In the latest announcement, US major ExxonMobil is lowering its 2020 capital expenditure budget by 30pc, with the bulk of the reduction going to its Permian onshore shale operations.

The EIA said today that US second quarter gasoline consumption will fall by almost 25pc from previous estimates and that fuel demand could take 18 months to fully recover.

The agency also said that its crude production forecast assumes that all oil stripper wells are shut in. The agency described the wells as producing no more than 15 b/d of oil equivalent (boe/d) during a 12-month period.

In Texas, regulators formally set a virtual hearing for 14 April to discuss curtailing the state's oil production to help balance the market.

The meeting is in response to a request by two shale producers, Pioneer Natural Resources and Parsley Energy, to "determine reasonable market demand for oil in the state of Texas," according to a notice filed by the Texas Railroad Commission, the lead regulator of oil and gas in the state.

The EIA said today that its forecast model does not include any "such proration of production" until the Texas Railroad Commission actually orders production cuts.

The agency also said the US will return to being a net importer of crude and petroleum products in the third quarter of 2020 and remain a net importer in most months through the end of 2021. The US became a net exporter of crude and petroleum products in September for the first time in decades of monthly data. The broad category includes crude, petroleum products such as gasoline and distillate fuel oil, and natural gas liquids such as ethane and propane. The US is a net importer of crude by a large margin.

By Eunice Bridges