by Jeff Reed
The EIA on Wednesday said US oil production dropped to an almost one-year low and that low oil prices will likely keep US output declining through 2016.

Timetable For U.S. Recovery Pushed Back 6 Months

In its monthly short-term energy outlook, the agency said that production dropped by 140,000 bpd in August from the previous month. At its peak in April, oil production averaged 9.6 M/bpd, the highest rate since 1971. Since then, output has steadily declined to 9.1 million per the EIA, the lowest since last September.

The EIA also pushed back its projections for a US production recovery by approximately six months. The agency now says monthly production will continue dropping until it hits 8.6 million barrels per month until August 2016. In the Wednesday report, it lowered its production expectations for both this year and next by approximately 1.5%- to 9.2 M/bpd and 8.8 M/bpd, respectively. Crude oil production is projected to continue falling through mid-2016 before growth resumes in late 2016.

Late 2016 Production Uptick

Production is expected to begin rising in late 2016, returning to an average of 9.0 M/bpd in 4Q15. A total of 12 projects are scheduled to come online in the Gulf of Mexico in 2015 and 2016, pushing up production from an average of 1.4 M/bpd in 4Q14 to more than 1.6 M/bpd in the same period of 2016.

“Current low oil prices are making some US oil production less profitable,” EIA Administrator Adam Sieminski said in a statement.

Oil prices, especially in 2Q15, remained adequately high to support continued development drilling in the core areas of the Bakken, Eagle Ford, Niobrara, and Permian basins, with July showing the first month-to-month increase in the oil-directed rig count since October 2014.

However, WTI prices below $60/bbl through the EIA's forecast period are expected to slow the rate of recovery in onshore drilling and well completion totals, despite continued increases in rig and well productivity and declining drilling and completion costs. "The forecast remains sensitive to actual wellhead prices and rapidly changing drilling economics that vary across regions and operators," the EIA said.

Downward Revisions To Price Forecast

It also reduced its price forecast for both WTI and Brent through next year. The EIA said WTI would average $53.57/bbl in 2016, down 1.6% from the previous STEO report. WTI averaged $93.17/bbl last year.