WASHINGTON–On the back of rapidly growing domestic crude oil production, the U.S. Energy Information Administration is projecting the nation’s production will exceed crude oil imports as early as the end of this year, for the first time since February 1995.

EIA’s Short-Term Energy Outlook for March 2013 projects U.S. crude oil production will increase from an average of 6.5 million barrels a day in 2012 to 7.3 MMbbl/d in 2013 and 7.9 MMbbl/d in 2014. “Drilling in tight oil plays in the onshore Williston, Western Gulf and Permian basins is expected to account for the bulk of production growth,” the agency states.

Alaskan crude oil production is projected to decline from 530,000 bbl/d in 2012 to 500,000 bbl/d this year and 470,000 bbl/d next year. U.S. federal Gulf of Mexico crude oil production averaged 1.3 MMbbl/d in 2012, which EIA points out was 50,000 bbl/d lower than 2011. It is projected to increase to 1.4 MMbbl/d in 2013 and 1.5 MMbbl/d in 2014 in the March Outlook.

EIA says total liquid fuels consumption, which it notes fell from an annual average of 20.8 MMbbl/d in 2005 to 18.6 MMbbl/d in 2012, is projected to grow only 30,000 bbl/d (0.1 percent) this year and by 80,000 bbl/d (0.4 percent) in 2014. Distillate fuel oil consumption is expected to grow 10,000 bbl/d this year and 60,000 bbl/d in 2014, while motor gasoline and jet fuel consumption remain flat both years as increasing travel is offset by fuel economy improvements.

As a result, EIA says, “Since reaching 12.5 MMbbl/d in 2005, total U.S. liquid fuel imports, including crude oil, have been falling. Total net imports fell to 7.4 MMbbl/d in 2012, and we expect them to continue declining to an average of 6.0 MMbbl/d by 2014.

“Similarly, the share of total U.S. consumption met by liquid fuel net imports peaked at more than 60 percent in 2005 and fell to an average of 40 percent in 2012,” the agency adds. “We expect them to fall to 32 percent in 2014, which would be the lowest level since 1985.”

Global Supply, Demand

The March Outlook reports world liquid fuels consumption grew by 800,000 bbl/d in 2012 to reach 89.1 MMbbl/d. EIA says it expects the growth rate will be higher this year and next as a result of moderate recovery in global economic growth. The March Outlook puts world liquid fuels consumption at 90.1 MMbbl/d in 2013 and 91.5 MMbbl/d in 2014.

Much of that growth in demand comes from Asian countries outside the Organization for Economic Cooperation and Development, EIA points out. The agency says it expects refinery crude oil inputs in China to rise as oil product inventories are restocked and new refining capacity comes on line. The March Outlook estimates liquid fuels consumption in China increased by 380,000 bbl/d in 2012, and will increase by 450,000 bbl/d in 2013 and by 510,000 bbl/d in 2014. This compares with annual average growth of 540,000 bbl/d from 2004 through 2010.

OECD liquid fuels consumption, meanwhile, fell by 500,000 bbl/d in 2012. EIA projects OECD consumption will decline another 300,000 bbl/d this year because of declining consumption in Europe, then will flatten in 2014 as European consumption begins to recover in response to higher economic growth.

EIA projects non-OPEC liquids production will increase by 1.2 MMbbl/d this year and by another 1.4 MMbbl/d in 2014. “North America accounts for almost three-quarters of the projected growth in non-OPEC supply because of continued production growth from U.S. tight oil formations and Canadian oil sands,” the agency remarks.

EIA notes that the Organization of Petroleum Exporting Countries, and Saudi Arabia in particular, cut production heavily in fourth-quarter 2012. It says Saudi Arabia cut production from 9.9 MMbbl/d during third-quarter 2012 to 9.0 MMbbl/d in February 2013.

The March Outlook projects OPEC crude oil and liquids supply will decline 400,000 bbl/d this year, to 36.0 MMbbl/d, before rising by 500,000 bbl/d in 2014. “Most of the 2013 decline comes from Saudi Arabia in response to non-OPEC supply growth,” EIA says.

Surplus OPEC capacity stayed about 2.8 MMbbl/d in February, which EIA says was an increase of 800,000 bbl/d from the year-ago level, but still 200,000 bbl/d lower than the previous three-year average. The March Outlook projects OPEC surplus capacity at an average 2.9 MMbbl/d in 2013 and 3.4 MMbbl/d in 2014.

The March Outlook predicts West Texas Intermediate crude oil prices will average $92 a barrel both this year and next, down from $94 a barrel in 2012. However, EIA says the spot price for Brent crude will drop from $112 a barrel in 2012 to $108 this year and $101 in 2014, reducing its price advantage over WTI.

“By 2014, several pipeline projects from the Mid-Continent to Gulf Coast refining centers are expected to come on line, reducing the cost of transporting crude oil to refiners, which is reflected in Brent’s falling price differential,” EIA states.

Natural Gas

U.S., natural gas spot prices, meanwhile, are projected to increase from $2.75 an MMBtu at the Henry Hub in 2012 to an average of $3.41 an MMBtu this year and $3.63 an MMBtu in 2014, according to the March Outlook.

The report puts U.S. gas consumption at 70.0 billion cubic feet a day both this year and next. “Forecasts for closer-to-average winter temperatures in 2013 and ’14 (compared with the record-warm temperatures in 2012) lead to increases in natural gas used for residential and commercial space heating,” EIA reasons. “The projected increase in natural gas prices contributes to a decline in natural gas used for electric power generation from 25.0 Bcf/d in 2012 to 23.1 Bcf/d in 2013 and 22.7 Bcf/d in 2014.”

Projected U.S. natural gas production increases from 69.1 Bcf/d in 2012 to 69.6 Bcf/d in both 2013 and ’14, EIA continues, adding, “Onshore production increases slightly over the forecast period, while Gulf of Mexico production declines.”

Natural gas pipeline imports, which EIA notes have declined over the past five years, are projected to remain near their 2012 level of 8.1 Bcf/d both this year and next, according to the March Outlook. Liquefied natural gas imports are expected to remain at minimal levels of less than 500 million cubic feet a day both years.

EIA points out that U.S. pipeline exports of natural gas to Mexico have increased from 900 MMcf/d in 2010 to 1.7 Bcf/d in 2012. “Mexico has expanded its natural-gas-fired power generation and plans to continue to do so. Competitively priced natural gas from the United States makes pipeline imports by Mexico an attractive option,” EIA says.