Non-OPEC crude oil production seen falling in 2016 – EIA

Non-OPEC crude oil and other liquids production are expected to grow by 1.2 million barrels per day (b/d) in 2015, and then decline by 0.4 million b/d in 2016, the first annual fall in non-OPEC production since 2008, the U.S. Energy Information Administration (EIA) has said in a report.

It said in its Short-Term Energy Outlook that the shift in expectation from non-OPEC production growth to declines in 2016 was mostly because of declines in U.S. onshore and North Sea production.

Non-OPEC production growth in 2015 is largely attributable to investments committed to projects before the oil price decline that began in mid-2014, the report said, adding that a redirection of investment away from exploration towards currently producing fields has also helped maintain or increase production levels in other non-OPEC countries.

“This strategy has helped maintain production levels in the short term, but it will likely result in lower future production in areas that depend on continued exploration successes for output growth,” an EIA statement said.

EIA expects U.S. crude oil production declines to continue through September 2016, when total production is forecast to average 8.5 million b/d. This level of production would be 1.1 million b/d less than the 2015 peak reached in April. Forecast production begins increasing in late 2016, returning to an average of 8.7 million b/d in the fourth quarter. Expected crude oil production declines through September 2016 are largely attributable to unattractive economic returns in some areas of both emerging and mature onshore oil production regions, as well as seasonal factors such as anticipated hurricane-related production disruptions in the Gulf of Mexico.

Reductions in 2015 cash flows and capital expenditures have prompted companies to defer or redirect investment away from marginal exploration and research drilling to focus on core areas of major tight oil plays, it said.

EIA forecasts OPEC crude oil and other liquids production to increase by 1.1 million b/d in 2015, led by production increases in Iraq.

The report forecast OPEC crude oil and other liquids production to increas by 0.6 million b/d in 2016, with Iran expected to increase production once international sanctions targeting its oil sector are suspended. At its December 4 meeting, OPEC members announced they “should continue to closely monitor developments in the coming months.” This indicates OPEC producers, led by Saudi Arabia, are continuing the policy of defending market share in a low oil price environment.

EIA expects global consumption of petroleum and other liquids to grow by 1.4 million b/d in both 2015 and 2016. Projected real gross domestic product (GDP) for the world weighted by oil consumption, which increased by 2.7% in 2014, is expected to rise by 2.3% in 2015 and by 2.6% in 2016. Despite continuing demand growth and slowing supply growth, global petroleum and other liquids production continues to outpace consumption, leading to inventory expansion throughout the forecast period.

Global oil inventory builds in the third quarter of 2015 averaged 1.8 million b/d, down from 2.0 million b/d in the second quarter, which had the highest level of inventory builds since the fourth quarter of 2008. The pace of inventory builds is expected to slow in the fourth quarter to roughly 1.4 million b/d. In 2016, inventory builds are expected to slow further to an average of 0.6 million b/d, the EIA said.

 

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