NEW YORK, Sept 7 (Reuters) - The U.S. Energy Information Administration forecast U.S. crude production for 2016 and 2017 will fall by less than previously expected, according to a report issued on Wednesday, adding to growing fears that drillers are returning to the wellhead and increasing production.
The agency said 2016 crude production will fall by 650,000 barrels per day (bpd) to 8.77 million bpd, while 2017 crude output will fall by 260,000 bpd to 8.51 million bpd, according to the EIA's short term energy outlook.
Previously, the EIA forecast a decline of 700,000 bpd to 8.73 million bpd in 2016 and a decline of 420,000 bpd to 8.31 million bpd in 2017.
The revised forecast comes after global benchmark Brent prices rallied as much as 23 percent since the start of August, hovering just around $48 a barrel on Wednesday.
"The decline in U.S. oil production this year and in 2017 is not expected to be as steep as in previous forecasts, because of improved drilling rig efficiencies and more rigs drilling," EIA Administrator Adam Sieminski said in a statement.
He added that oil inventories are expected to grow in the second half of 2016, limiting upward moves on oil prices.
The EIA also raised its 2016 and 2017 U.S. oil demand growth outlook, with 2016 expected to rise by 200,000 bpd to 19.60 million bpd and 2017 to rise by 140,000 bpd to 19.74 million bpd.
Last week, Baker Hughes reported that the U.S. oil drilling rig count rose for a ninth week in ten.
(Reporting by Catherine Ngai; Editing by Marguerita Choy)
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