WASHINGTON, D.C. (Bloomberg) -- U.S. crude production will fall to its lowest since 2013 next year as battered shale drillers idle rigs to conserve cash, according to a government report.
Producers from Texas to Alaska will pump 8.19 MMbopd in 2017, down from 8.67 MMbopd this year and less than the 8.46 MMbopd previously forecast, the Energy Information Administration said in its monthly Short-Term Energy Outlook Tuesday. The forecast for crude output in 2016 was also cut, from 8.69 MMbopd estimated in February. The decline won’t be enough to boost crude prices beyond last year’s level, though, according to the EIA estimates.
Shale drillers from EOG Resources Inc. to Apache Corp. are cutting spending and reducing output targets after crude hit a 12-year low last month. They have sidelined more than two-thirds of the country’s oil rigs in the past 17 months, to the least since December 2009 last week, according to data compiled by Baker Hughes Inc.
‘Production Depletion’
“We are not drilling enough wells to replace the normal production depletion,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. "The declining production should be bullish for prices going forward."
West Texas Intermediate, the country’s benchmark, will average $34.04/bbl in 2016, down from a February projection of $37.59, according to the report. Prices will average $40.09 next year, down from the last forecast of $50, and still lower than $48.67 last year. Futures have rebounded 41% from a 12-year low of $26.05/bbl on Feb. 11, trading at $36.74 on the New York Mercantile Exchange as of 1:47 p.m.
Brent crude, the benchmark for more than half the world’s oil, is projected to average $34.28 this year, down from the prior estimate of $37.52.
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