Global oil markets expected to tighten in third quarter 2017 before loosening in 2018
The June edition of The U.S. Energy Information Administration’s (EIA) Short-Term Energy Outlook (STEO) revised its forecast of world production of crude oil and other liquids in 2017, also predicting that 2018 will see a slight decrease.
This adjustment followed the May 25 announcement by the Organization of the Petroleum Exporting Countries (OPEC) of an extension to production cuts that were originally scheduled to end this month.
OPEC’s crude oil production target will stay at 32.5 million barrels per day (b/d) through the end of the first quarter of 2018. Taking into account the extended production cuts, EIA now predicts OPEC members’ crude oil production to average 32.3 million b/d in 2017 and 32.8 million b/d in 2018, down 0.2 million
b/d and 0.4 million b/d, respectively, from the previous STEO.
Continued production growth in non-OPEC countries, however, is expected to result in a slight inventory build in 2018. The largest increase is expected from Brazilian and OPEC production increases in the second quarter of 2018.
EIA expects that crude oil prices may increase over the coming months due to expected inventory draws. Higher crude oil prices in mid-2017 may raise U.S. supply in 2018.
U.S. crude oil production is projected to increase through 2018, averaging 9.3 million b/d in 2017 and 10.0 million b/d in 2018. The 2018 STEO forecast surpasses the previous record U.S. production level of 9.6 million b/d, which was set in 1970.
Increases in U.S. production of crude oil and hydrocarbon gas liquids has been the largest contributor to the 820,000 b/d of non-OPEC liquids supply growth from January through May 2017. Continued increases in drilling activity in U.S. shale basins, especially in Texas, support production increases throughout the forecast.