Oil prices are poised to drop next year as U.S. crude production reaches a 45-year high, government forecasters said Tuesday.
West Texas Intermediate will average $94.67 a barrel in 2015 versus the August projection of $96.08, the U.S. Energy Information Administration said Tuesday in its monthly Short-Term Energy Outlook. The EIA trimmed its Brent crude forecast for next year to $103 from $105.
Rising U.S. crude production is bolstering the country’s energy independence, Adam Sieminski, the administrator of the EIA, said in a statement. The agency forecast output of 8.53 million barrels a day this year, up from 7.45 million last year, and 9.53 million in 2015, the most since 1970. It’s also pushing down the EIA’s forecast for gasoline prices.
“The U.S. oil production forecast for 2015 was revised up by 250,000 barrels per day, with total output expected to be at the highest level since 1970,” Sieminski said. “Rising monthly crude oil production, which will approach 10 million barrels a day in late 2015, will help cut U.S. fuel imports to just 21 percent of domestic demand, the lowest since 1968.”
Retail gasoline is forecast to average $3.46 a gallon this year and $3.41 in 2015, according to the EIA. That’s down from last month’s forecasts of $3.50 and $3.46.
Horizontal drilling and hydraulic fracturing, or fracking, have unlocked supplies in shale formations in North Dakota, Texas and other states. U.S. crude production jumped to 8.6 million barrels a day in August, the most since July 1986, the EIA said.
WTI will average $98.28 a barrel this year, down from last month’s projection of $100.45, the report showed. Brent is forecast to average $106 this year, lower that the August estimate of $108.11. WTI settled at $92.75 a barrel Tuesday on the New York Mercantile Exchange. Brent settled at $99.16 on the London-based ICE Futures Europe exchange.
Oil production outside of the Organization of Petroleum Exporting Countries will rise 3.4 percent from 2013 to 55.91 million barrels a day this year. The 2014 output projection was increased 100,000 barrels from August’s report.
OPEC members will produce 35.77 million barrels a day this year, the EIA said. Last month’s forecast was 35.84 million.
“Global oil supplies are expected to grow by 1.3 million barrels a day in 2015, with output growth in the United States accounting for about 91 percent of that,” Sieminski said.
The department left its forecast for global oil consumption this year little changed at 91.55 million barrels a day from 91.56 million last month. The forecast for 2015 demand was cut to 92.89 million barrels a day from 92.96 million.
Total global liquid fuel consumption in projected to climb 38 percent to 119 million barrels a day in 2040, the EIA said in a separate report released Tuesday. Asia and the Middle East will be the main drivers of the demand surge, according the International Energy Outlook 2014.
“The growth outlook for liquid fuels use will be largely driven by demand in the developing world, especially in Asia and the Middle East,” Sieminski said. “Those two regions combined account for 85 percent of the total increase in liquid fuels use worldwide over that period.”
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