EIA forecasts for 2015
According to the U.S. Energy Information Administration (or EIA), US crude output increased to 9.14 million barrels per day (MMbpd) through December 12. This is the most in weekly data from the EIA, which goes back to January 1983. The EIA expects production to average 9.3 MMbpd in 2015.
However, plunging crude prices that have crept into the new year have created a potential for crude production to decline. Indeed, the EIA scaled down its 2015 production growth forecast from 900,000 to 700,000 barrels.
In its latest Short Term Energy Outlook (or STEO), the EIA trimmed its WTI (West Texas Intermediate) crude price forecasts to $63 per barrel in 2015. The 2015 forecast is 17% lower than the EIA’s previous projection.
For Brent, the EIA expects prices to average $68 per barrel in 2015. This is ~18% lower than the previous forecast.
Tanking oil prices will hurt the margins of oil producers such as ConocoPhillips (COP), Chevron Corporation (CVX), Continental Resources (CLR), and Whiting Petroleum (WLL). All these companies are components of the Energy Select Sector SPDR ETF (XLE).
As crude prices continued to drop in 2014, major oil producers such as Saudi Arabia and Iraq, part of OPEC (Organization of the Petroleum Exporting Countries), decided to maintain current production levels. The drop in prices accelerated due to this decision.
OPEC supplies almost 40% of oil to world markets. Therefore, its members, especially Saudi Arabia, can control supplies to balance them with demand when prices are turbulent.
Oil prices capped the year 2014 with a 46% drop. This is the biggest annual drop since 2008.
Other major highlights concerning crude prices in 2014 were booming US production to the highest in three decades. This weakened global demand and Saudi maneuvers to win back market share by slashing Saudi oil prices for US and Asian countries after refusing to cut production.
As US production continues to surge and demand outlook remains weak, crude prices have taken a further beating. So the EIA has trimmed its price forecasts for 2015.
Continue to the next part to read about the EIA’s global oil supply projections.