Rystad Energy’s Oil Markets view on US oil supply and explanation of recent EIA data revisions

September 14, 2017

Author: Rystad Energy

EIA’s STEO US oil production revised down from Jun-17 onwards on too high Lower 48 ex-GoM estimates over the summer months

On September 12th, the EIA published its Short Term Energy Outlook (STEO) for Sep-17. The short term STEO estimates for US oil production from Jun-17 onwards has been too high given the EIA’s previous overestimation of Lower 48 ex-GoM (read: shale) production forecast and the latest Petroleum Supply Monthly (PSM) actuals for Jun-17 published on August 31st.

Hence, US oil production in the Sep-17 STEO was “marked-to-market” for Jun-17 and consequently revised down by 230 kbbl/d to 9.09 mmbbl/d. Rystad Energy’s estimate of Jun-17 actuals is slightly lower at 9.038 mmbbl/d based on our well-by-well coverage.

 STEO estimates for US oil supply are still too high for 3Q 17, but too low for 2018

Importantly, the revision in the STEO US supply estimates was not due to the effect of Hurricane Harvey in particular, but mostly due to too high US onshore production figures over the summer months (Jun-17 through Aug-17). Moreover, the STEO monthly US oil production forecast through Dec-18 was also revised down, but less so than the Jun-17 adjustment. We continue to believe that the STEO still overestimates the Lower 48 ex-GoM production for Jul-17 through Sep-17, by on average ~170 kbbl/d currently.

For 4Q 17 and through 2018, however, we have higher US production forecast than the STEO. We expect horizontal oil completion activity to increase up to a level of ~900 wells per month for 4Q 17 from an average of ~660 wells per month for 2Q 17. At our current forecast for well completion activity of 950 wells per month for 2018, roughly flat production y/y in US GoM and Alaska for 2018, we forecast US oil production to average 10.4 mmbbl/d for 2018 vs. the EIA’s latest forecast of 9.8 mmbbl/d. Despite the fact that we see some downside risk to company activity as indicated in the latest OMTReport, we nevertheless believe the STEO clearly underestimates the US oil production potential next year.

EIA weekly supply estimates for Aug-17 were around 500 kbbl/d too high

Finally, the weekly US production figures, which for the most recent months of Jul-17 and Aug-17 reflect the previous Aug-17 STEO forecast, has shown a large discrepancy to the trend in the monthly PSM numbers.

Compared to the latest STEO forecast for the month of Aug-17, the average weekly supply estimate for Aug-17 at 9.50 mmbbl/d is higher by 306 kbbl/d. Compared to what we forecast as actual US oil production for Aug-17, the weekly figure was almost 500 kbbl/d too high.

As a consequence of the new STEO forecast and the impact of Hurricane Harvey, the weekly US supply estimate for the week ending September 1st dropped by 749 kbbl/d week-on-week. We forecast actual production in Aug-17 of 9.00 mmbbl/d and a further recovery to 9.14 mmbbl/d for Sep-17. We assess the current US’ oil production potential without the current disruptions at ~9.5 mmbbl/d, a level we expect can be reached during Oct-17.

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Contacts

Bjørnar Tonhaugen, VP Markets; co-author of the Global Oil Market Trends Report (OMTReport)
Phone: +47 24 00 42 00
bjornar.tonhaugen@rystadenergy.com

Paola Rodriguez-Masiu, Analyst; Oil Markets
Phone: +47 24 00 42 00
nadia.martin@rystadenergy.com

Nadia Martin Wiggen, VP Markets; co-author of the Global Oil Market Trends Report (OMTReport)
Phone: +47 24 00 42 00
nadia.martin@rystadenergy.com

David White, Marketing Manager
Phone: +47 24 00 42 00
david.white@rystadenergy.com

About Rystad Energy

Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.

Rystad Energy’s headquarters are located in Oslo, Norway. Further presence has been established in Norway (Stavanger), the UK (London), USA (New York & Houston), Russia (Moscow), Brazil (Rio de Janeiro), as well as Singapore and Dubai.