US oil production forecasts revised higher

Updated 11 March 2017

US oil production forecasts revised higher

LONDON: US oil production forecasts for 2017 and 2018 have been boosted significantly as a result of rising prices as well as improved modeling techniques for predicting output down to the well level.
Crude production is expected to reach 9.53 million barrels per day (bpd) in December 2017, according to the latest forecasts from the US Energy Information Administration (EIA).
Forecast output for December 2017 has been revised up from 8.29 million bpd when the agency prepared its predictions in March last year. The forecasts are contained in the “Short-Term Energy Outlook” EIA publishes every month. Forecast output has been revised higher every month since September 2016.
Revisions are concentrated in output from the lower 48 states, excluding federal waters in the Gulf of Mexico, so they are mostly about shale output, rather than offshore fields and Alaska.
The EIA has revised expected output at the end of 2017 from the lower 48 excluding the Gulf of Mexico up by 1.4 million bpd since March 2016.
Upward revisions stem from a combination of higher oil prices, an increased number of rigs drilling and improvements in methodology. Operators have added many more rigs and produced more oil than the agency was forecasting just six months ago.
Oil prices ended up being $5 per barrel higher in the fourth quarter of 2016 than the agency forecast back in August. Prices in the first quarter of 2017 have so far averaged about $7 higher.
Higher prices have contributed to more drilling, particularly in the Permian Basin of western Texas and eastern New Mexico, raising the current rig count and actual production the forecast uses as a baseline.
Higher rig counts have also revealed new information about the price levels at which operators in certain areas can increase production, which have filtered through to the models that the agency uses.
In addition to the price impact, the agency has made a number of improvements to its methodology.
According to the agency, these changes have been phased in over several months and contributed to the upward drift in the forecasts.
EIA has shifted from basin-level to well-level forecasts and improved its understanding of the time lags between price changes and when operators add drilling rigs.
The agency has also tweaked the model it uses to allow for more interplay between oil and gas prices, allowing the model to select whether drillers will focus on oil or gas depending on price differentials.
Price differentials can be important in shale plays such as Eagle Ford, which have both liquids-rich and gas-rich areas.
Finally, the agency has updated its assumptions about improvements in drilling efficiency, allowing efficiency to change more quickly.
As a result, US production is now expected to pass its previous peak in March 2018 and to reach 10 million bpd by the end of 2018.
• John Kemp is a Reuters market analyst. The views expressed are his own.

EU’s Barnier urges UK to accept EU court deal for Brexit

Updated 26 May 2018

EU’s Barnier urges UK to accept EU court deal for Brexit

  • Brexit negotiator says Britain playing "hide and seek" by delaying details on trade relationship.
  • UK ministers decry remarks as not "helpful."

BRUSSELS: EU Brexit negotiator Michel Barnier warned Britain on Saturday that failing to agree a deal on the governance of a withdrawal treaty which preserves the primacy of the EU court would mean no treaty and no transition period.

Barnier also described British delays in spelling out what kind of trade relationship London wants as “a game of hide and seek” in remarks prepared for delivery to a gathering in Portugal of jurists specialized in EU law.

He chided British criticism of EU positions as a “blame game,” urging London to recognize that it could not retain many elements of EU membership after Brexit.

The sharp tone of the former French minister’s remarks follow several days of talks in Brussels between his team of EU negotiators and British counterparts, after which a senior EU official dismissed as “fantasy” both London’s overall proposals for future close relations and an offer to avoid a disruptive “hard border” between Northern Ireland and EU member Ireland.

British ministers said those remarks were not “helpful.”

Barnier said he was ready to have “political level” talks to try to advance in three key areas where uncertainty remains, 10 months before Britain is due to leave in March 2019 — how to rule on future disputes over the withdrawal treaty, a “backstop” solution for the Irish border and a framework for future ties.

Referring to discussions within Prime Minister Theresa May’s government on whether to drop an insistence on having no customs union, he said: “If the United Kingdom would like to change its own red lines, it must tell us. The sooner the better.”
“We are asking for clarity,” he added. “A negotiation cannot be a game of hide and seek.”

On the issue of the governance of a withdrawal treaty, which both sides hope to have ready around October, Barnier repeated the EU’s insistence that primacy of the European Court of Justice inside the Union be maintained in regulating any dispute that could not be resolved by a joint committee appointed by the political leadership of the two sides.

“We cannot accept that a jurisdiction other that the Court of Justice of the European Union determines the law and imposes its interpretation on the institutions of the Union,” he said.

The role of British judges would be respected, he added.

But without an agreement on this, the whole deal would collapse: “Without an agreement on governance, there will be no withdrawal agreement and so no transition period.”

Many businesses are counting on an interim accord to maintain a broad status quo between Britain and the EU after Brexit until the end of 2020.

Barnier, who has been hoping to making substantial progress on key issues before May meets fellow EU leaders at a Brussels summit in a month, also criticized what he called a “blame game” in which British officials were accusing the EU of failing to show flexibility to allow continued close cooperation in areas such as security, the economy and research.

This, Barnier said, was to ignore the close legal framework within the EU which was the basis for trust and cooperation among its nation-state members. “We cannot share this decision-making autonomy with a third country,” he said.

“The United Kingdom must face up to the reality of the Union ... It is one thing to be inside the Union and another to be on the outside.”