American Oil and Gas Reporter - May 2016 - 102

to an average of 9.0 MMbbl/d in March,"
EIA comments. "Because West Texas Intermediate crude oil prices are projected
to remain below $40 a barrel through the
first half of 2017, we expect oil production
to decline in most lower-48 onshore producing regions."
The agency adds that the expectation
of reduced cash flows this year and next
has prompted many companies to scale
back investment programs and defer major
new undertakings. Projected low prices
throughout the forecast period are expected
to limit onshore drilling and well completions, despite continued increases in
rig and well productivity, and falling
drilling and completion costs, EIA adds.
It notes rig counts reported by Baker
Hughes averaged fewer than 450 in March,
down from more than 600 in January.
EIA says it expects U.S. crude oil
production to decline from 9.1 MMbbl/d
in the first quarter of 2016 to an average
of 7.9 MMbbl/d in the third quarter of
2017. It says, "Production of 7.9 MMbbl/d
would be 1.8 MMbbl/d below the April
2015 level, which was the highest monthly
production since April 1971. Production
is expected to begin increasing modestly
in fourth quarter 2017, reflecting productivity improvements, lower breakeven costs, and anticipated oil price in-

creases."
Projected crude oil production for the
forecast period rises in the Gulf of Mexico
and falls in Alaska. EIA notes production
in those areas is less sensitive than onshore
production to short-term price movements
and reflects anticipated growth from new
projects in the Gulf of Mexico and declines
from legacy fields in Alaska.
The agency says several Gulf of Mexico
projects that began operations in the past
two years, or that are expected to commence this year, will increase production
from an average of 1.5 MMbbl/d in 2015
to 1.9 MMbbl/d in the fourth quarter of
2017. "Some projects may start production
later than expected, potentially shifting
some of the anticipated production gains
from late 2017 into early 2018," EIA
hedges.
World View
Outside the United States, EIA is forecasting petroleum and liquids supply,
which includes crude oil, lease condensate,
natural gas plant liquids, biofuels and refinery processing gains, to increase by
200,000 bbl/d this year before falling by
an equal amount in 2017. The agency
says it expects total non-OPEC petroleum
supply, which grew by 1.5 MMbbl/d in
2015, to decline by 400,000 bbl/d in

2016 and by 500,000 bbl/d in 2017.
"Petroleum and other liquids production
is relatively robust through the forecast
period because of investments committed
to projects when oil prices were higher,"
EIA explains. "Although oil companies
have reduced investments, most of the
cuts have been in capital budgets that
largely affect production levels beyond
2017."
EIA says crude oil production in the
Organization of Petroleum Exporting
Countries averaged 31.6 MMbbl/d in
2015, an increase of 800,000 bbl/d from
2014. The April Outlook forecasts 2016
OPEC output will increase by 600,000
bbl/d and that 2017 production will grow
by 500,000 bbl/d, with Iran accounting
for most of the increase. "The forecast
does not assume a collaborative production
cut among OPEC members and other
major producers in the forecast period,
as major OPEC producers continue their
strategy of maintaining market share,"
the agency advises.
EIA says OPEC's surplus production
capacity, which it says averaged 1.6
MMbbl/d in 2015, is expected to be 1.8
MMbbl/d this year and 1.6 MMbbl/d in
2017.
The agency adds that commercial
crude oil and other liquid fuels inventories

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