US oil boom will slow in 2015, feds forecast

HOUSTON – U.S. daily crude production will slow next year for the first time since the nation’s shale oil boom began three years ago, according to a new federal estimate.

In its first forecast of the nation’s energy position in 2015, the U.S. Energy Information Administration projected Tuesday that oil producers will increase production by about 750,000 barrels of oil per day in 2015. That’s a drop from an expected daily increase of 1.03 million barrels in 2014 and the growth of the past two years.

Falling oil prices could dampen the incentive for energy companies to produce as much crude in 2015, a symptom of shrinking demand for motor fuels as automakers sell more efficient cars, said John Staub, head of the EIA’s exploration and production team.

“People aren’t traveling quite as much as in the past,” Staub said.

Still, the EIA’s projected daily production of 9.3 million barrels per day in 2015 comes close to levels in 1972,  one of the nation’s highest years for oil production on record. The agency believes the nation set a record in 2013 with a production increase of 1 million barrels, the largest in history.

Global impact: Unforeseen US oil boom upending markets worldwide

The nation’s oil wells began to blossom from Texas to North Dakota three years ago when producers shifted their focus to oil after natural gas prices plummeted on a flood of supply. If the federal projections for 2015 prove accurate, U.S. crude production will have grown about 64 percent since 2011.

Falling production

The EIA said the growth  likely will continue to drive petroleum imports out of the market next year, when government analysts expect liquid fuel imports to shrink to 24 percent of U.S. consumption, its lowest share since 1970. But the end of the oil boom may be approaching. Last month, the EIA predicted that U.S. oil output would peak in 2016 at 9.5 million barrels, just shy of the nation’s record in 1970. Production will begin to drop in 2020, according to the agency.

Oil production is “ultimately based on how good those investments look,” because even though production rates at North American shale plays are declining rapidly, there’s still plenty of oil there, said John Lee, a professor of petroleum engineering at the University of Houston. “These big shale plays they are by no means fully developed.”

If the U.S. government accedes to the oil industry and lifts a ban on selling crude overseas, oil prices would rise and production would keep increasing after 2020, but that idea has met strong political opposition, Lee said.

“Politically, I think (lifting the ban on crude exports) would be very difficult to get through,” Lee said.

Oil prices

Increasing oil supply from the U.S. and other non-OPEC countries is expected to drive down prices for Brent, the international benchmark crude, to an average $102 per barrel in 2015 from an average $109 per barrel last year. Meanwhile, U.S. benchmark crude West Texas Intermediate will likely trail Brent by a $12 per barrel discount next year 2015, the EIA reported.

WTI fell further behind Brent last year after pipeline companies untangled a bottleneck of crude in Cushing, Okla., stranded at storage facilities on the way to Gulf Coast refineries. That had kept U.S. oil prices elevated for several years. International crude prices, especially in North America, may also face pressure this year from rising oil output from the Middle East and slowing economic growth and oil demand in China, Moody’s Investors Service reported this week.

Crude supplies from non-OPEC companies are expected to reach a record increase of 1.9 million barrels per day this year. Prices at the pump are also expected to fall next year on the surge in crude: Drivers could pay an average $3.39 for a gallon of regular in 2015, down from a projected $3.46 this year, according to EIA estimates.


Also on FuelFix:

Wildcatter bets big on Eagle Ford’s fringe