The EIA just revised down its forecast for U.S. oil production growth for 2018, an acknowledgement that pipeline constraints are slowing output gains in the Permian basin.
The EIA believes the U.S. will average 10.68 million barrels per day (mb/d) this year, down 0.11 mb/d from last month’s estimate. It also revised down its forecast for next year’s average output to 11.7 mb/d, down from 11.8 mb/d previously.
The downward revision comes after recently released data from the agency suggested that output growth during this past spring was not as robust as previously thought. The EIA, at the time, thought shale production continued to grow at a blistering rate, with production rising by over 200,000 bpd between the beginning of April and the end of May. But more recent data suggests that production actually dipped a bit over that period.
It may seem like an insignificant revision, but it points to broader problems, particularly in the Permian basin, which could cause the U.S. to undershoot expectations going forward.
Recent movements in the rig count lend a little more weight to this notion. While the number of rigs bounces around from week to week, the overall number is essentially unchanged since May. And in the Permian, where all the drilling action has been concentrated, the rig count stood at 480 at the start of August, no higher than it was in early June.
“The lower forecast for output this year reflects slightly slower than expected growth in middle quarters of this year, possibly related to pipeline constraints out of the Permian basin that have reduced wellhead prices in the region,” Tim Hess, a product manager for the EIA’s Short-Term Energy Outlook said, according to Bloomberg.
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