EIA cuts 2016 production forecast for US

The US Energy Information Administration (EIA) has lowered outlook for the US crude production in 2016. EIA has reduced the forecast for 2016 by one percent in the US oil production.

The continuous drop in oil prices is forcing shale drilling companies to reduce their activity in the North America. Consumers are enjoying the cheaper gasoline price and this is increasing the demand for the motor fuel. The drop in US oil production may prompt OPEC (Organization of Petroleum Exporting Countries) to slash its output.

Energy Information Administration has cut US production outlook by one percent to 8.77 million barrels per day. EIA in its monthly short-term energy outlook, previously increased estimate for the year to 9.29 million barrels per day from 9.25 million forecast in October.

Feeling the heat of lower oil prices, the oil drilling companies have put aside over half of their rigs from October onwards. The number of active rigs in the US fell by 103 to 572 during the past 11 weeks. This is least number of rigs in operation during the past five years, according to the data from Baker Hughes Inc.

EIA Administrator Adam Sieminski said in an e-mailed statement that the total oil production from "non-OPEC countries is expected to decline next year for the first time since 2008, because of lower oil output in the United States."

Opec accounts for 41 percent of global oil production and this is likely to remain at this level for the decade and then may increase to 44 percent by 2025. This is two percentage points higher than the EIA's estimate. The oil price may rebalance itself at $80 a barrel in 2020 and may further rise after this level, according to the EIA report.

The average Brent crude price is forecast to be $56.24 for 2016 lower than past prediction of $58.57. Brent crude price is the benchmark for over half of the world's oil.

The average gasoline price in the US $2.43 per gallon for 2015, marginally up from past prediction of $2.42. The report also forecasts the drop in retail prices to $2.33 in 2016, lower than October's prediction of $2.46.

The US EIA has lowered WTI price forecast for 2016 and increased prediction for 2015. It's also predicted that the average price of WTI (West Texas Intermediate) on NYME (New York Mercantile Exchange) in 2016 is expected to be $51.31 a barrel.

This is lower than the projection of $53.57 in October. The average price of WTI for 2015 would be $49.88 up from October's prediction of $49.53.

Lower gasoline prices are pushing domestic demand up. Moreover, the drop in drilling activity is also adding to the demand. The gasoline consumption in the US is expected to go up by 2.1 percent to 9.11 million barrels per day for 2015.

The gasoline consumption is forecast to increase by 0.1 percent in 2016. The US gasoline demand is touching its highest level since 2007. The reduction in the unemployment rate, lower gasoline prices, surge in wages and reduction in drilling activity are creating more demand in the US.