Hope rises for oil prices as U.S. shale production declines further
The rising crude oil prices may be sustained till next year, as U.S. crude oil production has continued to decline and expected to drop from the current level of 9.4 million per day it recorded by December 2015 to 8.7 million per day in 2016.
The U. S Energy Information Administration (EIA), which made this disclosure on Wednesday, in a media statement, projected a further slid to 8.2 million barrels per day next year.
Specifically, EIA disclosed that production declined by 80,000 per day in February, which has positively impacted on crude oil prices.
EIA said the oil production reached its lowest level since November 2014. Production also declined from year-ago levels for the first time in more than four years.
It noted this continued production decline was the result of lower crude prices, which have declined more than 70 per cent since the summer of 2014.
Crude oil production in December 2015 averaged 9.3 million barrels per day (bpd), down 166,000 bpd from December 2014 and the first year-over-year decline in U.S. monthly oil output since September 2011, Domestic oil production has generally declined month to month since reaching a 44-year peak of almost 9.7 million bpd in April 2015.
“Even as production declined, output was still above levels from the same month a year earlier”, it added.
It disclosed that most of the decline in oil production has occurred in states where a large portion of output comes from tight oil formations, including North Dakota, Texas, and New Mexico.
The statement noted that oil production from tight formations accounted for most of the increase in U.S. oil production during the past five years, and it is now making up most of the decline in output.
The EIA stated that natural gas working inventories were 2,536 billion cubic feet (Bcf) during the month under review, representing a 46 per cent = higher than during the same week last year and 36 per cent higher than the previous five-year average for that week.
EIA forecasts that inventories will end the winter heating season (March 31) at 2,288 Bcf, which would be 54 per cent above the level at the same time last year. Henry Hub spot prices are forecast to average $2.25 per million British thermal units (MMBtu) in 2016 and $3.02 per MMBtu in 2017, compared with an average of $2.63/MMBtu in 2015.
Natural gas is expected to fuel the largest share of electricity generation in 2016 at 33 per cent, compared with 32 per cent for coal.
This, it said, would be the first time that natural gas provides more electricity generation than coal on an annual average basis.
“In 2017, natural gas and coal are both forecast to fuel 32 per cent of electricity generation. For renewables, the forecast share of total electricity generation supplied by hydropower rises from six per cent in 2016 to seven per cent in 2017, and the forecast share for other renewables increases from eight per cent in 2016 to nine per cent in 2017”.
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