U.S. Lowers WTI Price Forecast as Domestic Production Gains

Jan 07, 2014 4:19 pm ET

(Updates with settlement prices for WTI and Brent in fifth paragraph.)

Jan. 7 (Bloomberg) -- The Energy Information Administration lowered its price forecast for West Texas Intermediate crude and said the U.S. grade’s discount to Brent will widen as domestic production surges.

WTI will average $93.33 a barrel this year, down by 1.8 percent from last month’s projection of $95, the Energy Department’s statistical unit said today in its monthly Short- Term Energy Outlook. That would increase WTI’s spread with Brent to $12.09 from the December estimate of $9.08. Domestic crude output will reach the highest level in 42 years in 2015, the EIA said.

“Growing production in North America is contributing to lower oil prices ahead,” said Tancred Lidderdale, an economist with the EIA in Washington who helped write the report. “The price of WTI relative to Brent is going to be lower.”

Brent will average $105.42 this year, the EIA predicted, versus last month’s estimate of $104.08. The January report also included forecasts for 2015. WTI will average $89.58 and Brent will be $101.58 next year, the EIA said.

WTI for February delivery increased 24 cents, or 0.3 percent, to end at $93.67 a barrel on New York Mercantile Exchange. February Brent rose 62 cents, or 0.6 percent, to $107.35 a barrel on the ICE Futures Europe exchange. The European benchmark traded at a $13.68 premium to WTI.

Rising Output

Crude production will rise to 8.54 million barrels a day this year, up 14 percent from last year’s 7.5 million, and will reach 9.29 million next year, the most since 1972.

Imports will account for 24 percent of total U.S. liquid fuel consumption in 2015, the lowest level since 1970. That’s down from 33 percent in 2013 and 60 percent in 2005. Domestic production surpassed imports in October for the first time since 1995.

“The growth in domestic production has contributed to a significant decline in petroleum imports,” the EIA said in the report.

Output has surged as a combination of horizontal drilling and hydraulic fracturing, or fracking, unlocked supplies trapped in shale formations from Texas to North Dakota.

The EIA increased its global oil-consumption forecast for this year to 91.59 million barrels a day from 91.43 million estimated last month. Demand in the U.S. will be 18.88 million, up from 18.77 million forecast in December.

--Editors: Richard Stubbe, Margot Habiby