Oil prices will remain low next year, but not so low as to hurt domestic oil drilling, federal analysts predicted.
Crude oil in the West Texas Intermediate benchmark will average $62.75 a barrel next year, down from this year’s $93.82 and last year’s $97.91, the Energy Information Administration (EIA) predicted Tuesday.
That has raised concerns among some analysts and oil drillers that lower prices wouldn’t justify the added costs of shale oil drilling.
Shale oil has accounted for most of the growth in drilling in recent years, but it usually involves hydraulic fracturing and is more expensive than traditional forms of drilling that are more common in established oil areas.
“Continued lower oil prices will make some drilling activity less profitable in both emerging and mature U.S. oil production areas,” EIA Administrator Adam Sieminski said in a statement.
“However, oil prices are expected to remain high enough in 2015 to support new drilling in the major shale areas in North Dakota and Texas, which account for most of the growth in U.S. oil production.”
EIA’s analysis came in its monthly Short-Term Energy Outlook.
Sieminski said low prices will cause the market to correct itself, resulting in lower production in an effort to prop up prices.
Nonetheless, oil production will average 9.32 million barrels a day domestically, the highest level since 1972, the agency said.