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EIA raises oil price forecast
US
THE US Energy Information Administration (EIA) has raised its 2020 forecasts for both Brent and West Texas Intermediate (WTI). In its latest short-term energy outlook, released on January 14, the agency said it expected Brent crude spot prices to average $65 per barrel in 2020 and $68 per barrel in 2021, compared with an average of $64 per barrel in 2019. It added that it now antic- ipated WTI prices averaging about $5.50 per barrel lower than Brent prices over the course of 2020 and 2021, compared with an average WTI discount of about $7.35 per barrel in 2019.
“This price discount is based on the assump- tion of continued sufficient pipeline capacity from production areas in West Texas and from Cushing, Oklahoma, to refineries and export terminals along the US Gulf Coast,” the EIA said in its report.
The EIA is now projecting WTI to average $59 per barrel over the course of 2020, up by $2
per barrel from last year. This is a 7.7% increase on its previous WTI forecast, while the agency’s projection for Brent prices in 2020 is up by 7.1%.
The EIA’s US oil production forecast has also been raised, and is now at 13.3mn barrels per day in 2020 – up 0.9% on its previous projection – and 13.7mn bpd in 2021. The Permian Basin, spanning West Texas and New Mexico, is still anticipated to account for the majority of the country’s output growth.
The EIA estimates that US crude produc- tion averaged 12.2mn bpd in 2019, up 1.3mn bpd year on year. If its projection for 2020 plays out, this will still mark a slowdown in growth, but a smaller one than had been expected previously.
However, in the immediate term, there is more pessimism, with oil trading near six- week lows this week amid an increase in US stockpiles.
Texas regulators processing drilling permits in record time
TEXAS
STAFF at the Railroad Commission (RRC) of Texas – the agency that regulates oil and gas activity in the state – have set a historic record of taking just two days on average to process stand- ard drilling permits in both 2018 and 2019. This is one day below the legislative requirement, the agency noted this week.
The RRC reported that it had processed a total of 11,654 new drilling permits over the course of 2019. Standard drilling permits are those that do not require exceptions to RRC rules governing issues such spacing or density. Almost 99% of operators apply for drilling permits online, help- ing to speed up the approval process.
“The Railroad Commission’s technological solutions enables operators to quickly apply for and receive drilling permits,” said the RRC’s executive director, Wei Wang.
Once approved, drilling permits in Texas are valid for two years.
Texas is by far the largest producer of both oil and natural gas in the US. The state holds a large portion of the prolific Permian Basin, which is responsible for the bulk of US oil and gas pro- duction growth. It is also home to the Eagle Ford shale, and portions of other conventional and unconventional fields. In the last 12 months, operators in Texas produced around 1.438bn barrels of oil and almost 10 trillion cubic feet (283bn cubic metres) of gas.
The state is thought to have considerable additional production potential. The US Geolog- ical Survey (USGS) has estimated that the Per- mian Basin contains 66bn barrels of oil, nearly 300 tcf (8.5 trillion cubic metres) of gas and 21bn barrels of natural gas liquids (NGLs) across both the Midland and Delaware sub-basins.
“Texas will continue to be the nation’s leader in energy production,” Wang said.
Others have been more pessimistic on the state’s nearer-term prospects, however, warn- ing that persistently low oil prices and share- holder pressure on drillers could lead to a slowdown in the Permian’s production growth this year. Indeed, rig counts in the basin have fallen below 400 – levels not seen since late 2017. However, efficiency gains have enabled drillers to produce more with fewer rigs, and for now the region’s production continues to drive overall US output growth.
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