Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
Oil prices are shaking off the stock market turmoil and now focusing on a surprise drop in weekly supply, as reported by the American Petroleum Institute (API). Yet, with the rebound in stocks and a reduction in fear and turmoil, why wasn’t oil higher? Well perhaps because of a report from the Energy Information Administration (EIA) that will rock the world as we know it. The EIA reported that the United States, which has been a net energy importer since 1953, will be on track to become a net energy exporter by 2022. Take a minute to let that sink in. Despite years of fears about the world running out of oil, or about the comments that we could never drill our way to energy independence, we will now be a net exporter.
We knew this day was coming. Just a few years ago the full gravity of the potential of the shale revolution was not understood by many. Yet, not only has the shale revolution changed the outlook for the U.S. economy but the economies of the world. It also has put us in a better position from a geo-political risk standpoint as we are no longer dependent on foreign sources of oil. Yet, at the same time the lack of investment in big oil projects still is a threat to oil prices in the future, but at least, let us enjoy this moment.
The EIA in their Short Term Energy Outlook also raised their forecast for U.S. oil production. The EIA estimated that U.S. crude oil production which averaged 10.2 million barrels per day (b/d) in January, was up 100,000 b/d from the December level. The EIA estimated that total U.S. crude oil production averaged 9.3 million b/d in 2017 and will average 10.6 million b/d in 2018, which would mark the highest annual average U.S. crude oil production level, surpassing the previous record of 9.6 million b/d set in 1970. EIA forecasts that 2019 crude oil production will average 11.2 million b/d.While we still believe that those estimates are probably inflated by about 5%, they still reflect what we predicted many years ago and that was the U.S. was going to be the world global hub of energy.
The EIA also reported some very bearish news for natural gas. The EIA estimates that U.S. dry natural gas production averaged 73.6 billion cubic feet per day (Bcf/d) in 2017. EIA forecasts that natural gas production will reach 80.3 Bcf/d in 2018, establishing a new record. That level would be 6.7 Bcf/d higher than the 2017 level, and the forecast 2017 growth would be the highest annual average growth on record. EIA expects natural gas production will also increase in 2019, with forecast growth of 2.6 Bcf/d.
This is great news considering we were running out of gas just a decade or so ago!
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The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2018
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