WASHINGTON — U.S. oil production is likely to fall this year in part due to price volatility, a top government energy official told a Senate committee on Tuesday.
Testifying before the Senate Energy and Natural Resources Committee, Adam Sieminski, administrator at the U.S. Energy Information Administration, said last year’s 8 percent production increase won’t be mirrored in 2016.
“This is very different than two years ago, when production was climbing and climbing rapidly,” Sieminski said.
And while U.S. oil production is predicted to fall, the EIA forecasts that global inventory will rise throughout 2016, meaning prices at the pump should stay low.
Antoine Halff, a research scholar at the Columbia University School of International and Public Affairs, attributed the glut in oil worldwide to the “surprising resilience” of shale oil production in the United States. However, Halff classified a price increase as “inevitable” as the market corrects over the next 18 months.
“While it may be true that oil prices have yet to bottom out, expectations that cheap oil are the new norm are misguided,” Halff said. “Eventually, the price will rebound.”
Some analysts support Halff’s prediction for a rebound.
John LaForge, co-head of real asset strategy at the Wells Fargo Investment Institute, recently said in a report that a turnaround should be on its way. According to his findings, the drop in prices, represented by the NDR Commodity Composite, has exceeded the last two bear markets at a 44 percent decline.
“The worst appears to be over,” the report says.
However, markets have yet to reflect this mood. Oil continues to hover around $30 per barrel, and futures contracts through 2027 do not reach $50 per barrel, according to quotes from CME Group.
In addition, other commodities markets are expected to continue suffering. According to the EIA, U.S. coal exports fell by 21 percent in 2015 and are forecasted to keep dropping — by 12 percent this year and 4 percent in 2017. And Daniel McGroarty, principal at Washington-based Carmot Strategic Group, characterized the outlook for industrial metals as “bleak,” citing drops of 30 percent and higher over the past five years for metals like aluminum, lead and nickel.
“In the case of critical metals and minerals, the U.S. is deeply dependent and growing more so,” McGroarty said, adding that if this trend continues, “Production of key metals is going to take place elsewhere.”