The U.S. Energy Information Administration (EIA) just released its short-term energy outlook for the month of November 2013 and has revealed that U.S. crude oil production has surpassed its net imports for the first time in the past eighteen years.
U.S. crude oil production
U.S. crude oil production stood at 7.74 million barrels per day (bblpd) in the month of October 2013 while the monthly imports averaged 7.57 million bblpd during the same period. “Monthly estimated domestic crude oil production exceeded crude oil imports in October for the first time since February 1995, while total petroleum net imports were the lowest since February 1991,” stated the EIA report.
Figure 1: US crude oil domestic production and net imports 2009-2014
Production to continue growing through 2014
It is expected that the U.S. domestic production will continue to grow at a strong pace in the remainder of 2013 and through the entire of 2014. Production will continue to grow at a steep rate of 0.98 percent per month. While production in the current month averaged 7.74 million bblpd, this number is expected to touch 8.88 million bblpd by the end of 2014.
The EIA report explains the rationale behind this trend: “The continued focus on drilling in tight oil plays in the onshore Bakken, Eagle Ford, and Permian regions is expected to account for the bulk of forecast production growth over the next two years. Offshore production from the Gulf of Mexico is forecast to average 1.2 million bbl/d in 2013 and 1.3 million bbl/d in 2014.”
Prices on downward trajectory
The EIA has been forecasting the price of crude oil to drop for quite some time now. However, the North Sea Brent crude oil during the month of October once again averaged USD 109 per barrel. EIA expects Brent to drop to USD 105.5 by the end of this year and to touch USD 101 by the end of 2014. On the other hand, West Texas Intermediate (WTI) is to drop faster, from USD 100.5 in October 2013 to USD 94.5 by the end of 2013 and USD 93 by December 2014.
The discount of WTI to Brent crude fell to an average of USD 8.54 in the month of October from USD 20 in February 2013. The shrinkage in the differential was brought about by a seasonal decline in domestic demand in the U.S. and the resultant increase in inventories. However, the “EIA expects the WTI discount to average USD 10 per barrel during the fourth quarter of 2013 and USD 8 per barrel in 2014.”
Figure 2: Crude oil prices 2009-2014