Forecasting US Oil Production… EIA

The EIA’s “This Week In Petroleum” discusses forecasting US oil production, here…

“EIA’s STEO forecast for the Permian region experienced many revisions in 2018 as prices changed in response to evolving market expectations (Figure 2). Production in the Permian region exceeded EIA’s expectations despite large price spreads that likely put downward pressure on production. As historical data filled in with a two-month lag and forecast prices were revised, significant upward revisions were repeatedly made to the Permian production forecast.”

”EIA’s regional forecast for the number of active rigs is driven predominately by the fourth-month lagged WTI-Cushing spot price (WTI-Midland in the Permian) and the previous month’s rig activity. Changes in the number of active rigs lead to changes in the number of new wells drilled and completed and their associated production volumes within about two months after the rigs become active. In addition, EIA does month-by-month analysis for well completions in response to external short-term problems such as pipeline constraints and weather-related problems such as hurricanes and freeze-offs. Consequently, the STEO oil production forecast is based largely on the observation that changes in production volumes typically occur about six months after a change in the price of crude oil.”