U.S. cuts oil output outlook as Permian constraints threaten
NEW YORK (Bloomberg) -- The pace of U.S. crude production growth might be slowing or at least that’s what the government is seeing for now.
The Energy Information Administration forecasts domestic oil output to average 11.7 MMbpd next year, down from a previous estimate of 11.8 MMbpd. The agency also lowered its outlook for output this year. Last month, the agency said the U.S. is set to become the world’s top oil producer in 2019. The EIA still sees production reaching 12 MMbpd by the end of next year.
The U.S. benchmark crude has jumped more than 14% this year. Drilling has plateaued since late June, with the U.S. oil rig count ticking lower for four out of the last seven weeks, with concerns lingering over bottlenecks in the key Permian basin tempering growth.
“Because crude oil production is forecast to be lower in 2018, it lowered the overall output forecast for 2019,” said Tim Hess, a product manager for the EIA’s Short-Term Energy Outlook. “The lower forecast for output this year reflects slightly slower than expected growth in middle quarters of this year, possibly related to pipeline constraints out of the Permian basin that have reduced wellhead prices in the region.”
Halliburton Co., the world’s biggest frac provider, warned that second-half profits will suffer on a slowdown in the Permian and other parts of the U.S., citing pipeline shortages and other issues that will delay work in the Permian and Marcellus basins.
The EIA sees domestic crude output averaging 10.68 MMbpd this year, lower than previous estimate of 10.79 MMbpd, yet still above the 1970 record of 9.6 MMbpd, according to the agency’s Short-Term Energy Outlook released on Tuesday.
Meanwhile, globally, OPEC members and allies collectively agreed to boost output by 1 MMbpd in response to consumers’ concern with high oil and fuel prices. Yet, OPEC’s increase in oil output won’t be enough to offset any imminent losses of Iranian supplies amid a resumption of sanctions against the nation, analysts at Australia & New Zealand Banking Group Ltd. said.
Its global crude production forecast for next year was lowered to 101.94 MMbpd from 102.54 million previously. The agency also cut its world demand growth estimate for 2019 to 101.66 MMbpd from 101.91 million.
