US drilling activity accelerating: Sieminski

US oil producers are stepping up drilling activity amid the recovery in oil prices to near $50/bl, said Adam Sieminski, head of the Energy Information Administration (EIA).

A resilient shale oil industry and higher output from the Gulf of Mexico as new fields come on line will lead to a slower decline rate for US output next year, Sieminski said at the US Association for Energy Economics (USAEE) conference this week. US production may only fall by about 150,000 b/d in 2017 compared with about 700,000 b/d this year.

"US production is more robust with respect to prices," Sieminski said, noting his recent interactions with exploration and production companies reveal that they are accelerating their drilling activities. "They are putting money in."

The drilling rig count in the US has risen by nearly 37pc since the end of May, when it hit its lowest point in at least three decades, as steep cost cuts make operations for some producers economic at current prices.

The EIA, in its latest Short Term Energy Outlook on 13 October, raised its 2017 crude production forecast to 8.6mn b/d, up by 80,000 b/d from the previous estimate. At least two new fields in the Gulf of Mexico are expected to start, helping the US output recover next year, he said.

The EIA in the same report also increased its 2016 oil price estimates, with WTI expected to average $42.78/bl, up by 86¢/bl from the previous forecast, and Brent expected to average $43.43/bl, up by 89¢/bl. Price estimates for 2017 were lowered slightly, with WTI expected to average $49.99/bl and Brent forecast to average $50.99/bl, both down by 59¢/bl from the previous estimate.

The global macro economy and geopolitics will play a key role in influencing prices, he said. Key macroeconomic drivers will be not just China, but also growth in the US and the European Union, he said. A key geopolitical factor for markets will be the unfolding crisis in Venezuela.

"Venezuela has serious potential to add volatility in the market," he said.