Re-Posting EIA's Forecast For Crude Oil Prices In 2018

EIA has just released its monthly short-term energy outlook. The outlook on crude oil is worth re-posting:

• Brent crude oil prices averaged almost $58 per barrel in October, the highest monthly average since June 2015, as global oil stock have fallen by an estimated 400,000 barrels per day over the past six months. 
• EIA expects Brent prices to average $56 per barrel next year.
• Despite lower production in of the Gulf of Mexico during October, mainly attributed to Hurricane Nate, total U.S. crude oil production averaged 9.3 million barrels per day for the month. Our forecast continues to expect overall U.S. production to average 9.9 million barrels per day for all of 2018.

So, again, in case you missed it: Brent recently went to $58, getting everyone excited about a bull market in oil. But EIA forecasts Brent prices to average $56 in 2018. Correct me of I'm wrong, but $56 is two dollars less than $58. Other things to consider:

• unless the Brent - WTI spread flips, WTI will be trading in the range of $50 - $52 based on EIA's forecast for Brent -- $50 to $52
• OPEC forecasts US shale production to soar
• Saudi needs a minimum of $70-oil to balance its budget; $58 is a long, long way from $70

It's a fool's errand to forecast oil prices but assuming there is no geopolitical event in the Mideast that might upset the apple cart, I cannot argue with either the EIA or OPEC. 

US consumers should look forward to stable gasoline prices, and Saudi Arabia remains in deep doo-doo. 

From a Bloomberg article today, "OPEC fights back," dated November 7, 2017, one almost has to laugh. These were the two concluding paragraphs:

While prices are a bit better now, the coming years don’t look so great. OPEC is probably going to need to sustain its cuts for another year. Even if the cuts finish in late 2018, it’s looking at zero growth in demand for its crude until 2025 as shale takes all the new market share. 

OPEC’s World Oil Outlook 2017, published today, gives further encouragement. OPEC expects shale oil production to peak after 2025 and decline from about 2030. OPEC will then be required to increase its own output from about 33 million barrels a day in 2025 to 41.4 million in 2040, according to the report.

 

The Energy And Market Page, Part 2, T+290 -- November 7, 2017

EIA's short-term energy outlook released:

Oil Markets:

• Brent crude oil prices averaged almost $58 per barrel in October, the highest monthly average since June 2015, as global oil stock have fallen by an estimated 400,000 barrels per day over the past six months. 
• EIA expects Brent prices to average $56 per barrel next year.
• Despite lower production in of the Gulf of Mexico during October, mainly attributed to Hurricane Nate, total U.S. crude oil production averaged 9.3 million barrels per day for the month. Our forecast continues to expect overall U.S. production to average 9.9 million barrels per day for all of 2018.

Gasoline/Refined Products:

• U.S. regular gasoline retail prices averaged $2.51 per gallon in October.
• That price was down 14 cents per gallon compared with September, and we expect prices to continue trending down in a typical seasonal pattern through the end of 2017.
• Consumers could expect to see retail regular gasoline prices average $2.45 per gallon in 2018, just above the expected average retail price per gallon of $2.40 for all of 2017.

Natural Gas:

• We foresee a likely rebound in average household residential consumption of natural gas this winter, as we expect temperatures to be closer to average and therefore colder than last year.
• Following last year’s very warm winter, consumption could climb by 8% this winter.

Electricity:

• The share of utility-scale electricity generation for natural gas and coal continues to be evenly split at about 31% for each fuel source in 2017. 
• For natural gas, that’s down three percentage points from 2016, resulting largely from a combination of higher prices coupled with increased coal and renewables generation.

Coal:

• EIA revised its projections for coal exports up this month. We now expect to see U.S. coal exports to climb by about 37% from 2016 to 2017, as coal production continues to grow.

Renewables:

• The data indicate that conventional hydroelectricity in the United States will increase by roughly 13% in 2017 compared to 2016 because of heavy snow in the West last winter. At this time, we project hydroelectric generation will return in 2018 to levels closer to those seen in 2016.

*************************************

Cold front: Unfortunately I don't have the full graph, but it's enough for me. It appears the blue (cold) covers a much, much wider area than the red (warm). Don tells me it was 2 degrees below zero in Hettinger, ND, overnight.

This comes via Twitter:

SRE: on a day the market is down, SRE is up over a percent, hitting a new 52-week high. I assume it is because of these forecasts for a colder winter. SRE pays 2.77% even at this high share price. As late as December, 2013, SRE paid a quarterly dividend of 63 cents; it now pays a dividend of 82.3 cents per share and likely to raise that dividend in March, 2018.

Disclaimer: standard disclaimer in effect.

Kind Of Interesting -- EIA' s Latest Short Term Energy Outlook (STEO) -- September 12, 2017

Oil Markets:

• Industry watchers across the sector will have to grapple with uncertainty regarding the timeline for the return to normal operations for critical energy infrastructure, including refineries, in the coming weeks and months.
• U.S. crude oil production is forecast to average 9.3 million barrels per day in 2017 and 9.8 million barrels per day in 2018. Downward revisions to the forecast partly reflect the effects of Hurricane Harvey.
• EIA continues to expect growing oil output, with crude oil production forecast to reach an all-time high of 9.8 million barrels per day in 2018, topping the old 1970 record of 9.6 million barrels per day.

Gasoline/Refined Products:

• Following Harvey, the national average price of gasoline hit $2.68 a gallon, the highest in two years. EIA expects that to fall to an average of $2.61 a gallon for all of September and to $2.40 by October as, the energy supply system returns to more normal operations.
• We saw marked decreases in refinery operations following Hurricane Harvey, but operations are beginning to ramp up. EIA expects refinery runs in September to average 15.3 million barrels per day, well below the August level, but runs should increase into October.
• EIA expects that the loss of refined product production—because of reduced refinery operations—will be made up for through a combination of lower net exports and larger-than-normal inventory draws.

Natural Gas:

• Given NOAA’s forecast of a colder winter this year compared with last year, EIA expects natural gas prices to average almost $3.30 per million Btu this winter, up about 30 cents from last winter.

Electricity:

• Higher natural gas prices will likely contribute to a decrease in its share of total utility-scale electricity generation in 2017, falling by 3 percentage points compared to 2016. In contrast, coal will increase its share by 1 percentage point in 2017.
• EIA projects the electricity generation shares of natural gas and coal to remain largely unchanged in 2018 at averages of 31% and 32%, respectively.

Coal:

• U.S. coal production in 2018 is projected to reach its highest levels in three years because of expected growth in electric power sector demand. (The coal-powered car will start to impact coal production in the US.)

Renewables:

• Solar will continue to make gains in electricity generating capacity through 2018, with an expected 11 gigawatt increase from 2016’s 22 gigawatt capacity.

The Energy And Market Page, Part III, T+186 -- July 25, 2017

Market: smashes through to new records --

• S&P 500 closes at record high as earnings beat the Street

Economy, via Bloomberg --

• unemployment near a 16-year low (after two lost decades)
• US stocks reaching record highs
• consumers remain upbeat
• consumer confidence rises to 147.8, a 16-year high, from 143.9
• consumer expectations for the next six months gained to 103.3 from 99.6

Bloomberg tried to downplay these statistics, suggesting beneath these numbers are darkening clouds; and, of course they would. So anti-Trump, how else could they spin the story?

So, if you're a Hillary apologist, and have bought into the mainstream media story, and invested accordingly, you have missed one of the most spectacular equity rallies in history.

Other details from the economic report released today:

• respondents citing "good" business conditions rose to highest level since early 2001
• the labor differential widened to 16.1 percentage points, the highest since August, 2001 (very, very good)

 ******************************

Making America Great Again

From the EIA today:

In EIA’s latest Short-Term Energy Outlook (STEO), total U.S. crude oil production is forecast to average 9.3 million barrels per day (b/d) in 2017, up 0.5 million b/d from 2016.

In 2018, EIA expects crude oil production to reach an average of 9.9 million b/d, which would surpass the previous record of 9.6 million b/d set in 1970.

EIA forecasts that most of the growth in U.S. crude oil production through the end of 2018 will come from tight rock formations within the Permian region in Texas and from the Federal Gulf of Mexico. In the July STEO, the Permian region is expected to produce 2.9 million b/d of crude oil by the end of 2018, about 0.5 million b/d more than the estimated June 2017 production level, representing nearly 30% of total U.S. crude oil production in 2018. The Permian region covers 53 million acres in the Permian Basin of western Texas and southeastern New Mexico. --- EIA

*******************************

How Amazon Has Raised The Bar

Every so often Lego introduces a high-demand set that quickly sells out. When that happens, one can then find the same item on eBay selling for about 2x Lego's advertised price. Lego will eventually catch up with demand -- it usually takes about two months -- and Lego keeps its same original price. [As a rule of thumb: each piece averages out to 10 cents/piece; is a set has 1,000 pieces, it will cost $100.]

Lego recently came out with such an item; high demand and Lego quickly sold out. I bookmarked the site and checked periodically.

Yesterday, the item was available. I immediately ordered one set for my daughter (Lego set limit to two sets per order; we sometimes buy two sets on these special items, but for now, in this case, we just ordered one).

After placing my order, I called Lego to confirm that the order had gone through (it's a long story; unimportant).

"Josh" took my phone call. Great conversation. He, too, had been waiting for the Apollo Saturn 5 to become available again; he also noted that it had just come available but by company rules he is not allowed to order on the company computer; he said he will have to wait until he got home.

He said he was 42 years old and still loved Lego products. I no longer have any Lego collection; it's all gone to our younger daughter.

But I digress.

As noted, I ordered about 4:30 p.m. Central Time, Monday afternoon. Today, a robotic e-mail alerted me that the product had already shipped. It would be coming by FedEx -- historically a high-cost mailing option -- and would arrive at our daughter's address on Thursday -- with free shipping.

Without Amazon pushing retailers, I seriously doubt we would see retailers expediting these orders -- for all practical purposes, the Lego shipment is a two-day affair. And free. Even Amazon requires a $99 annual Prime membership for 2-day, "free" shipping.

The on-line price was identical to what I would pay in a local Lego store (if available) and half what it would have cost on eBay had I been too impatient to wait.

The "limit 2 per order" will disappear over time, I believe. Regardless, these high-demand sets are available for a year or so and then production ceases, I believe. It probably varies.

[I just checked Amazon and eBay: the Apollo Saturn V is available about twice the advertised Lego price. It will be interesting to see how fast these prices come down, especially over at eBay.]

Update, 2:49 p.m. Central Time, July 27, 2017:

This was ordered late Monday afternoon, US Central Time; it arrived about noon, US Central Time, Thursday, by FedEx -- free shipping. With free shipping and a free gift worth about $25, Lego is practically giving this item away. LOL.

EIA's Short Term Energy Outlook For May, 2017, Has Been Released

Oil Markets:

• Increased drilling rig activity is expected to boost to U.S. crude oil production this year and next, with forecast production in 2018 averaging 10 million barrels per day.
• Higher oil production from the United States, along with rising oil output from Canada and Brazil, is expected to curb upward pressure on global oil prices through the end of 2018.

Gasoline/Refined Products:

• The recent decline in crude oil prices and rising gasoline inventories are cutting into pump prices, lowering the average price U.S. drivers are expected to pay for gasoline this summer.
• U.S. gasoline inventories rose in April, a month when they normally fall.
• Because of higher overall pump prices this year, the average U.S. household is expected to spend about $150 more for gasoline during 2017 than last year. However, gasoline expenditures are still expected to be lower than the average for the previous five years.
• U.S. industrial production growth, rising rail traffic, and higher drilling rig activity are pushing up distillate fuel use.

Natural Gas:

• U.S. marketed natural gas production is expected to increase almost 5% next year.

Electricity:

• U.S. electricity generation is expected to be flat this year and then increase in 2018, with natural gas-fired generating facilities accounting for the biggest share of electricity supplies during both years.

Coal:

• U.S. coal production is expected to rise 5% this year and about 1% in 2018 on higher coal-fired electricity generation, which would be the first back-to-back annual increase in coal output since 2010-11.

Renewables:

• The amount of U.S. wind power generation capacity is expected to top 100 gigawatts by the end of next year, when it would account for 9% of the electric power sector’s total generation capacity, and provide more than 6% of total electricity supplies.

Tesoro Corp To Acquire Williston Crude Oil Transportation / Storage Asset -- Great Northern Midstream -- December 8, 2015

Updates

December 30, 2015: see Google satellite image of the Fryburg CBR terminal that Tesoro will be acquiring.

December 17, 2015: the story on Tesoro's pending acquisition of Great North Midstream (see below) in The Bismarck Tribune in which Tesoro will add capacity to pump 65,000 bopd of out of the Bakken:

Awaiting regulatory approval, Tesoro agreed last week to acquire Great Northern Midstream LLC and its crude oil pipeline, gathering system, storage and rail loading facilities in the state.

Assets include:

• the 97-mile BakkenLink crude oil pipeline (connects to several 3rd-party gathering systems;
• a 28-mile gathering system in the core of the Bakken where most of the drilling in today's low-price environment is being done;
• a 154,000 bopd rail loading terming (Fryburg); and, 
• a 657,000 barrel storage facility in Fryburg 

More:

Tesoro already has the Tesoro High Plains Pipeline, which pumps crude oil directly into the company’s 68,000 barrel-per-day refinery in Mandan.

“This acquisition would not substantially change the way we move product to our Mandan Refinery. We expect our enhanced system to provide Tesoro’s West Coast facilities with cost-effective access to advantaged crude oil and provide producers additional market access. Customers gain additional flexibility from the rail loading and storage facility, which can provide outbound deliveries to the West, East and Gulf coasts,” Tesoro spokesperson Brendan Smith said.

Original Post

Tweeting now:

Tesoro Corp to acquire Great Northern Midstream, which has Williston crude oil transportation and storage assets.

*************************

EAI Longer-Term Energy Outlook

December 8, 2015: from the EIA, today:

While U.S. onshore oil production is expected to continue declining through most of next year, offshore oil output in the Gulf of Mexico is on track to steadily rise.

In its new monthly forecast, the U.S. Energy Information Administration said offshore Gulf oil production is expected to increase to 1.7 million barrels per day during the fourth quarter of 2016 up about 250,000 barrels per day from the fourth quarter of last year.

See my commentary posted over the weekend in which I suggest it is unlikely that I will see $60 - $65 oil again in my investing lifetime.

*************************

EAI Short-Term Energy Outlook

Winter Fuels:

• The effect of lower crude oil prices, along with the potential for above-normal temperatures, is spilling over to lower residential heating oil expenditures, as the average household using heating oil should save almost $600 this winter.

Crude Oil:

• While U.S. monthly onshore oil production is expected to continue declining through most of next year, oil output in the Gulf of Mexico is on track to steadily rise.
• Energy companies have cut back on their onshore oil exploration and drilling activities in response to low crude prices, but oil production in the Gulf of Mexico is less sensitive to short-term movements in crude prices as companies are committed to completing more complex and costly offshore oil projects once they begin.

Gasoline/Refined Products:

• After paying the lowest Thanksgiving gasoline prices in seven years, U.S. drivers will continue to save money at the pump through December as low crude oil prices keep downward pressure on motor fuel costs.
• Local fueling stations in some areas of the country are already selling gasoline for less than $2 a gallon and those prices are expected to drop further in December.

Natural Gas:

• U.S. natural gas inventories posted their first decline of the winter heating season in late November, but natural gas inventories at the end of December are expected to be the third highest ever for the month.

Electricity:

• For the first time, more electricity is expected to be generated from natural gas than coal for five months in a row from July through November, as sustained low prices for natural gas make it more cost-competitive as a generating fuel.

Renewables:

• Both U.S production and net imports of biodiesel are expected to increase in 2016 in response to new federal renewable fuel standard targets.

EIA's Short-Term Energy And Winter Fuels Outlook -- October 14, 2015

Released last week, this screenshot is from EIA's short-term energy and winter fuels oulook:

*******************************

Notes For The Granddaughters

I have finally finished John Le Carre's Tinker, Tailor, Soldier, Spy. I didn't outline it in the conventional fashion but annotated it well enough to be able to go back and read it again, to see things I missed the first time. I do believe that seeing the movie resulted in my liking the book that much more. I would argue that Tinker is on my list of top ten movies. At the moment, it is #1, although it could quickly fall to #2 behind Birdman. [Casablanca, #1 for so many years, is still on the top 10 list, but could fall off if I don't watch it again. And soon.]

Having finished that book, I am ready to move on. Of course, I'm always reading a book on science. The current one is Atom: An Odyssey From The Big Bang To Life on Earth ... And Beyond. The title is perhaps a bit pretentious. I started reading the book some time ago -- on one of my cross-country trips, I suppose -- but never finished it. I accidentally purchased a second copy and told our older granddaughter she could donate it to her school library. It was then that she told me she was a member of the school's Library Club, or as my wife now tells me, "Oh, yes, that's her 'book club.'" I was not aware she was a member of the Library Club. I knew she was in math club and science club -- I guess the math club is a sprout off the science club -- but did not know she was also in the Library Club. And she's first chair, flute, in the middle school band, something she has become very competitive about, and will fight to keep first chair.

I would know none of this except driving her to school daily, and taking her to water polo practice twice a week, etc., things come out in dribs and drabs as they say in the Midwest.

But, again, back to the subject at hand. As I was saying, I finished Tinker and ready to move on. I am falling back into my Hemingway phase. I am re-reading Islands in the Stream and annotating that also, something I did not do the first time I read the book. I don't remember much about the book except that I recall that I did not like it. I'm re-reading it a second time to see why I should have liked it. To accompany it, I am eager to read a Gellhorn-related book, and on my shelves I have found a brand-new copy of Selected Letters of Martha Gellhorn, c. 2006. I bought it years ago from Half-Price Bookstores so I assume I bought it when we lived in San Antonio some years ago. $14.98.

Five pages into the book and I'm eager to watch Midnight in Paris, again.

And, yes, MIP is on my top ten movie list, also.

EIA's Short Term Energy Outlook, September, 2015

EIA's short-term energy outlook for September, 2015:
Crude Oil:

• U.S. monthly crude oil production is expected to decline through the middle of next year in response to low oil prices. Output then begins rising in late 2016 as oil prices are forecast to move higher.
• Despite the expected decline in monthly crude oil production, U.S. total oil output this year is forecast to be the highest since 1972. (Comment: so much for peak oil.)
•  Current low oil prices are making some U.S. oil production less profitable, with total estimated oil output during August alone down 140,000 barrels per day from the month before.

Gasoline/Refined Products:

• U.S. drivers will continue to see the effects of low crude oil prices as gasoline prices are expected to decline through the rest of this year, with the pump price falling to a national average of $2.03 a gallon by December. (Comment: if the national average did not include California, the average would be significantly lower.)
• Reduced gasoline demand following the peak summer driving season along with the switchover to lower-cost winter-grade motor fuel will help push gasoline prices lower during the remainder of 2015.
• U.S. drivers this past Labor Day weekend paid the lowest price for gasoline during the heavily traveled holiday in 11 years.

Natural Gas:

• U.S. natural gas production will increase and natural gas prices will be relatively low at least through the end of 2016.
• High natural gas production has been the main driver behind above-average increases in U.S. weekly natural gas inventories this year, building supplies for the upcoming winter heating season.

Electricity:

• In response to sustained low natural gas prices and environmental regulations, coal-fired power plant operators are expected to retire about nine gigawatts of generating capacity by the end of next year.

Intermittent Energy:

• Wind is expected to generate more U.S. electricity than hydropower during the fourth quarter of this year.

Coal:

• U.S. coal production will decline this year in response to less coal use by power plants and lower demand for U.S. coal abroad.

Random Update Of Three Huge Whiting Wells -- March 10, 2015; EIA STEO

Three huge Whiting wells still on confidential list have been updated.

********************************

EIA Short-Term Energy Outlook

U.S. Energy Information Administration Administrator Adam Sieminski issued the following comments on EIA’s March 2015 Short-Term Energy Outlook, which was released on Tuesday, March 10, 2015:

Crude Oil:

U.S. commercial crude oil inventories, which are already at the highest level since 1930, are expected to continue growing over the next two months.

The increase in oil inventories is expected to moderate as refineries ramp up their processing of crude oil into petroleum products in the second quarter and domestic oil production slows.

U.S. crude oil storage capacity is now 62% full compared with 48% a year ago.”

Gasoline: 

Even with the recent increases in gasoline prices, the average U.S. household is still expected to save $710 in gasoline costs this year compared with what was paid at the pump during 2014.

Gasoline prices have recently been driven higher by increasing crude oil costs as well as several unplanned refinery outages.

Winter Fuels Outlook:

Despite frigid temperatures over the past month in the eastern half of the country, the average household that uses heating oil as its primary space heating fuel is expected to spend 24% less on heating costs this winter compared with last winter, while homes using propane for heating are expected to spend 18% less and 32% less in the Northeast and Midwest, respectively.

Natural Gas:

Natural gas prices have remained low despite cold weather during February and early March, as domestic production growth remains strong.

Recent data shows record high U.S. natural gas production in December, and EIA increased the forecast for annual production growth by about 1 billion cubic feet per day for this year and in 2016.

Electricity:

Early indications are that the bitter cold experienced in the eastern United States last month, which led to high levels of electricity use for space heating, may have led monthly power generation to be above the level of any previous February.

Renewables:

The total amount of wind, solar, and other renewables used for electricity and heat generation is expected to grow by 2.9% this year.

Coal:

The effect of U.S. coal-fired power plant retirements and lower natural gas prices is reflected in a forecast for coal consumption in the electric power sector during 2015 that is 2.2% below the 2014 level.

The full STEO can be downloaded at: http://www.eia.gov/forecasts/steo/

***************************

And They Say Texans Love Guns

Tweeting now:  Utah lawmakers vote to become only state to allow firing squad if lethal drugs not available for executions - @AP.