• 7 hours Oil Prices Rise After API Reports Major Crude Draw
  • 8 hours Citgo President And 5 VPs Arrested On Embezzlement Charges
  • 8 hours Gazprom Speaks Out Against OPEC Production Cut Extension
  • 9 hours Statoil Looks To Lighter Oil To Boost Profitability
  • 10 hours Oil Billionaire Becomes Wind Energy’s Top Influencer
  • 11 hours Transneft Warns Urals Oil Quality Reaching Critical Levels
  • 12 hours Whitefish Energy Suspends Work In Puerto Rico
  • 13 hours U.S. Authorities Arrest Two On Major Energy Corruption Scheme
  • 1 day Thanksgiving Gas Prices At 3-Year High
  • 1 day Iraq’s Giant Majnoon Oilfield Attracts Attention Of Supermajors
  • 1 day South Iraq Oil Exports Close To Record High To Offset Kirkuk Drop
  • 1 day Iraqi Forces Find Mass Graves In Oil Wells Near Kirkuk
  • 1 day Chevron Joint Venture Signs $1.7B Oil, Gas Deal In Nigeria
  • 1 day Iraq Steps In To Offset Falling Venezuela Oil Production
  • 2 days ConocoPhillips Sets Price Ceiling For New Projects
  • 4 days Shell Oil Trading Head Steps Down After 29 Years
  • 4 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 4 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 4 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 4 days Venezuela Officially In Default
  • 5 days Iran Prepares To Export LNG To Boost Trade Relations
  • 5 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 5 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 5 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 5 days Rosneft Announces Completion Of World’s Longest Well
  • 5 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 5 days Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 6 days Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 6 days Santos Admits It Rejected $7.2B Takeover Bid
  • 6 days U.S. Senate Panel Votes To Open Alaskan Refuge To Drilling
  • 6 days Africa’s Richest Woman Fired From Sonangol
  • 6 days Oil And Gas M&A Deal Appetite Highest Since 2013
  • 6 days Russian Hackers Target British Energy Industry
  • 6 days Venezuela Signs $3.15B Debt Restructuring Deal With Russia
  • 6 days DOJ: Protestors Interfering With Pipeline Construction Will Be Prosecuted
  • 7 days Lower Oil Prices Benefit European Refiners
  • 7 days World’s Biggest Private Equity Firm Raises $1 Billion To Invest In Oil
  • 7 days Oil Prices Tank After API Reports Strong Build In Crude Inventories
  • 7 days Iraq Oil Revenue Not Enough For Sustainable Development
  • 7 days Sudan In Talks With Foreign Oil Firms To Boost Crude Production
Alt Text

Are Oil Markets Immune To U.S. Shale?

Oil prices have maintained their…

Alt Text

GE Looks To Divest Energy Assets As Turmoil Continues

General Electric’s turmoil continues as…

Alt Text

Keystone XL Pipeline Gains Approval After A 9-Year Battle

Nebraskan regulators have approved the…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

EIA Natural Gas Figures Don’t Make Sense

Natural Gas storage

The EIA published its latest Short-Term Energy Outlook and it is not exactly the most bullish report the agency has ever put out.

The EIA believes that the losses to U.S. oil production are largely over. It estimates that the U.S. will produce 8.6 million barrels per day (mb/d) in 2017, which is higher than the current output levels of just around 8.5 mb/d. The rig count is up and investment is returning to the shale patch, which should allow for more drilling and new sources of supply. The EIA revised up its forecast from last month for 2017 production by 0.1 mb/d.

At the same time, the EIA expects global inventories to build at a 0.3 mb/d pace next year, which is 0.3 mb/d more than the agency predicted in its previous forecast. The EIA sees higher production from the U.S. and Russia, combined with weaker global demand, extended the glut.

But there is other evidence that things appear to be turning a corner for U.S. drillers. The FT reports that investors are regaining their appetite for risky energy debt, with yields on high-risk junk bonds in the energy sector plummeting to just 7 percent, down from a peak of 21 percent earlier this year. Junk-bond sales from energy companies have also returned, the FT says, with five sales since September, accounting for more than half of the $3.8 billion in junk energy debt offered this year. “There is a pool of capital that wants exposure to the oil industry,” Rob Santangelo, head of equity capital markets origination in the Americas for Credit Suisse, told the FT. “We think the market is ready to put money to work.”

The rig count continues to rise and the share prices for E&Ps across the country have climbed in recent weeks. Many of them owe a great deal of thanks to OPEC, which has shaken the market out of its slumber, sparking a renewed sense of optimism even if the cartel’s ability to materially affect global supplies is ultimately questionable. Either way, investors are growing more confident as oil prices rise above $50 per barrel.

The EIA might see U.S. shale as resilient, but that could come at the expense of oil prices. The EIA’s 2017 forecast for Brent came in slightly lower this month, down $1 per barrel compared to last month’s report to $51 per barrel. That is not exactly the most exciting forecast – the agency expects oil prices to pretty much remain flat for another year. Related: IEA Pours Cold Water On Oil Price Rally

On the natural gas side of things, the predictions are a bit more curious. As noted in a previous article, U.S. natural gas production hit a peak in February 2016 and has been declining since then. A severe cutback in drilling – including less oil drilling, which affects associated gas production – has led to a drop off in gas output by about 5 percent this year. As a result, prices have crept up above $3 per MMBtu in recent weeks as supply continues to fall and demand rises.

But looking forward, the EIA has some seemingly contradictory figures for 2017. The agency sees natural gas production somehow rebounding sharply, surging from 77.5 Bcf/d in 2016 to 81.2 Bcf/d next year. That 3.7 Bcf/d increase is a bit hard to believe given that gas production will likely fall for the remainder of this year and into at least the early months of 2017. But it seems all the more improbable given that at the same time the EIA sees natural gas prices averaging just $3.07 MMBtu in 2017. With supply tightening, and prices already at $3.34/MMBtu for November 2016 delivery, the price forecast seems a bit odd.

For production to rise as sharp as the EIA believes, prices will probably need to be higher. If prices stay stuck at $3/MMBtu, it would seem like a bit of stretch to see production rise by so much next year. One of those predictions is likely off significantly.

Forecasts are inevitably wrong, and should not be taken as gospel. But the EIA’s natural gas estimates are hard to reconcile.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News