Insights
Oil and Gas Outlook: 2018
Posted December 20, 2017 in Articles
After another tumultuous year spurred by a flurry of national and international developments, the outlook for the U.S. oil and gas industry in 2018 is currently trending toward the positive side. With the lifting of America’s export ban continuing to spur domestic investment, the latest estimates from the Organization of Petroleum Exporting Countries (OPEC) suggest positive shifts for international oil producers as well. According to CNBC:
“OPEC now expects oil demand to rise by 1.51 million bpd next year, up 130,000 bpd from previously, to 98.45 million bpd. World economic growth is seen accelerating to 3.7 percent, up from 3.5 percent in the previous forecast.
And in another forecast moving in OPEC's favor, the report lowered its estimate of supply growth from non-OPEC countries next year. It now sees a rise of 870,000 bpd, down 70,000 bpd from the previous forecast. OPEC cited downward adjustments to Mexico and Norway for the revision.”
Forecasts From the U.S. Energy Information Administration (EIA)
In its Short-Term Energy Outlook dated December 12, 2017, the U.S. Energy Information Administration (EIA) forecasts price increases for all major liquid fuel classes, with the exception of natural gas. Brent Crude Oil is expected to see the greatest improvement at approximately $3.50 per barrel, while the price of West Texas Intermediate Crude Oil is expected to rise by just over $2.00 per barrel. The EIA expects gasoline and diesel to see more-modest increases (to average retail prices of $2.51 and $2.89, respectively), while the average price of natural gas is expected to decline by a similarly slim margin.
Will the U.S. Play a Greater Role in the Global Energy Market in 2018?
Although gross U.S. petroleum exports rose during 2017, the U.S. economy is still a net importer of crude oil. The trend toward a greater global market presence is expected to continue in 2018, with some experts forecasting that the United States’ role could change fundamentally over the coming year. Although production from non-OPEC countries is expected to move more toward stabilization overall, the U.S. could prove to be an outlier – and this could be significant if the OPEC nations move toward a deficit over the course of 2018.
The busy and devastating hurricane season slowed production in the Gulf Coast region in October. However, EIA’s data indicates that product levels bounced back quickly in November, and the agency expects this upward trend to continue through 2018: “EIA forecasts total U.S. crude oil production to average 9.2 million [barrels per day] for all of 2017 and 10.0 million b/d in 2018, which would mark the highest annual average production, surpassing the previous record of 9.6 million [barrels per day] set in 1970.”
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