Pump jacks extract oil and gas from the Eagle Ford Shale in Texas.
Oil producers in the U.S. are proving more resistant to low prices, even as global supply is set to fall into a deficit next year.
The Energy Information Administration increased its domestic output forecast for 2017 to 8.31 million barrels a day from 8.2 million projected in July, according to its monthly Short-Term Energy Outlook released Tuesday. Global oil consumption will exceed supply by an average 170,000 barrels a day next year, which compares with a 10,000 barrel surplus in July’s outlook.
The report sent futures lower by as much as 1.2 percent in New York after rising to a two-week high Monday.
West Texas Intermediate for September delivery fell 38 cents to $42.64 a barrel at 1:20 p.m. on the New York Mercantile Exchange. Brent for October settlement fell 49 cents to $44.90 on the London-based ICE Futures Europe exchange. The global benchmark traded at a $1.54 premium to WTI for October.
WTI is up more than 60 percent since touching a 12-year low in February, encouraging a resumption of drilling in the shale patch. Producers boosted the number of rigs seeking oil during the past six weeks, the longest run of gains since last August, according to Baker Hughes data.
“After a steep drop over the past year in U.S. oil production, a recent uptick in the number of rigs drilling for oil is expected to contribute to more steady monthly oil output starting this fall,” EIA Administrator Adam Sieminski said in an e-mailed statement. “Domestic monthly oil production is expected to begin consistently rising in late 2017 due in part to higher forecast oil prices and improvements in drilling productivity.”
World demand will average 97.76 million barrels a day in 2017, a 20,000 barrel reduction from last month. World production average 96.59 million barrels a day in 2017, which is down 200,000 barrels from July.
Pump prices keep falling
WTI and Brent will both average $51.58 in 2017, down from the EIA’s July forecast of $52.15.
The average retail price for regular-grade gasoline this summer is forecast at $2.19 per gallon, down from 6 cents from July’s estimate. Prices averaged $2.63 during the 2015 summer driving season.
“U.S. regular-grade gasoline prices are currently at a 16-week low and are expected to continue falling to a monthly average of less than $2 a gallon by the end of the year,” Sieminski said. “High gasoline production is leading to motor fuel inventories that are the highest on record for this time of year, which is helping to keep prices down at the pump.”