American Oil and Gas Reporter - May 2016 - 103

within the Organization for Economic
Cooperation and Development totaled
3.05 billion barrels at the end of 2015,
equivalent to roughly 66 days of consumption. Forecast OECD inventories
rise to 3.22 billion barrels at the end of
2016, and are expected to be 3.25 billion
barrels at the end of 2017.
With global oil inventory builds expected to average 1.4 MMbbl/d this year,
the April Outlook forecasts Brent Crude
Oil prices will average $35.00 a barrel
through the remainder of 2016 before
beginning to rise in first quarter 2017 to
a yearly average of $40.58.
"Forecast WTI prices average the same
as Brent through the forecast period,"
EIA reveals. "The price parity of WTI
with Brent is based on the assumption of
competition between the two crudes in
the U.S. Gulf Coast refinery market, as
transportation differentials are similar to
move the crudes from their respective
pricing points."
Natural Gas
EIA reports total marketed production
of U.S. natural gas averaged 79.0 billion
cubic feet a day in January, an increase
of nearly 1 percent from December. "Production in Pennsylvania and West Virginia
increased substantially from December
levels, offsetting declines in other areas,
particularly in Texas," the agency says.
"EIA survey data have shown some production flattening on a national level, and
we project relatively low production growth
through most of 2016," the agency continues.
"At the end of this year and into 2017, however, production growth is expected to rise
in response to increases in price, industrial
demand, and liquefied natural gas exports."

The April Outlook puts 2015 U.S. gas
production at an average of 78.9 Bcf/d
for all of 2015, and predicts it will average
79.6 Bcf/d this year and 81.4 Bcf/d in
2017.
EIA says it expects natural gas exports
to Mexico will increase because of growing
demand from Mexico's electric power
sector and flat natural gas production. It
projects LNG gross exports will increase
to an average of 500 million cubic feet a
day this year with the startup of Cheniere's
Sabine Pass liquefaction plant in Louisiana.
EIA projects gross LNG exports will average 1.3 Bcf/d in 2017, as Sabine Pass
ramps up its capacity.
EIA reports the Henry Hub natural
gas spot price averaged $1.73 an MMBtu
in March, which was down 26 cents from
the February price. "Warmer-than-normal
temperatures through most of the winter,
record inventory levels, and production
growth have contributed to sustained low
natural gas prices," the agency comments.
"Monthly average Henry Hub spot prices
are forecast to average $2.18 an MMBtu
in 2016 and $3.02 an MMBtu in 2017."
The April Outlook forecasts U.S. gas
consumption will average 76.2 Bcf/d this
year and 77.6 Bcf/d in 2017, compared
with 75.3 Bcf/d in 2015. "Increases in
the electric power sector primarily drive
increases in total consumption this year,"
EIA reasons. "Forecast electric power
sector use of natural gas increases by 3.9
percent this year, then declines by 1.3
percent in 2017 as natural gas prices rise.
Forecast industrial sector consumption
of natural gas increases by 2.7 percent in
2016 and by 2.2 percent in 2017, as new
fertilizer and chemical projects come on
line."
❒

Domestic Gas Price Key Factor
In U.S. LNG Exports, Study Says
EDINBURGH, SCOTLAND-In the
battle for international liquefied natural
gas markets, U.S. LNG exports are more
likely to be affected by domestic natural
gas prices than Russian attempts to protect
its market share, assesses Wood Mackenzie.
"With European LNG imports-including from the United States-set to grow
over the next five years, there is much
speculation about Russia's likely response,"
says Stephen O'Rourke, research director
of global gas supply for Wood Mackenzie.
"Will Russia's gas strategy mimic that of
Saudi Arabia's oil strategy? Will it seek
to retain market share in Europe, pushing

European gas prices to levels that force
the shut-in of U.S. LNG exports?"
Wood Mackenzie asserts that while
Russian responses will play a role, U.S.
LNG export utilization ultimately will
be determined by multiple factors, and a
large proportion of export volumes will
be under threat at times over the next
five years.
"Our analysis shows that while Russia's
export strategy is important, ultimately,
U.S. LNG export utilization will be influenced more by the price of other commodities-of U.S. gas, oil and particularly,
of coal, which will determine European
spot prices," says Noel Tomnay, head of

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