Yesterday the EIA released their latest Short Term Energy Outlook (STEO) report. They said that US oil demand for 2012 to be about the same as 2011 even though they are projecting a 2.1% decline for the first quarter. The main oil highlights from the report follow.
- Absent a significant oil supply disruption, EIA expects world markets to continue to gradually tighten in 2012 and 2013, as increases in global consumption outpace production growth in countries outside of the Organization of the Petroleum Exporting Countries (OPEC). World liquid fuels consumption grows by an annual average of 1.3 million barrels per day (bbl/d) in 2012 and 1.5 million bbl/d in 2013. Supply from non-OPEC countries increases by 0.8 million bbl/d in 2012 and 0.9 million bbl/d in 2013. EIA expects that the market will rely on both inventories and increases in production of crude oil and non-crude liquids from OPEC members to meet world demand growth.
- There are many significant uncertainties that could push oil prices higher or lower than projected. Should a significant oil supply disruption occur, and OPEC members do not increase production, or projected non-OPEC projects come online more slowly than expected, oil prices could be significantly higher than projected in this Outlook. If the pace of global economic growth fails to accelerate in Organization for Economic Cooperation and Development (OECD) countries, or if economic growth slows in non-OECD countries, reduced demand could result in lower prices
- World liquid fuels consumption grew by an estimated 0.8 million bbl/d to 87.9 million bbl/d in 2011. EIA expects that this growth will accelerate over the next two years, with consumption reaching 89.3 million bbl/d in 2012 and 90.7 million bbl/d in 2013. OECD consumption fell by 490 thousand bbl/d in 2011 and is expected to decline again in 2012 as very modest consumption growth in the United States and Japan will be more than offset by a decline in consumption in Europe. Non-OECD countries are expected to account for most of the world’s consumption growth over the next two years, with the largest contributions coming from China and the Middle East (World Liquid Fuels Consumption Chart). EIA expects that non-OECD consumption growth will increase from 1.3 million bbl/d in 2011 to 1.5 million bbl/d and 2012, and then slow to 1.3 million bbl/d in 2013.
- EIA expects non-OPEC crude oil and liquid fuels production to rise by 770 thousand bbl/d in 2012 and by a further 850 thousand bbl/d in 2013. The largest area of non-OPEC growth will be North America, where production increases by 350 thousand bbl/d and 260 thousand bbl/d in 2012 and 2013, respectively, resulting from continuing growth in production from U.S. onshore shale formations and Canadian oil sands. Other major growth areas include Brazil, where production increases annually by an average of 170 thousand bbl/d over the next two years with increased output from its offshore, pre-salt oil fields, and Kazakhstan, which will commence commercial production in the Kashagan field in 2013, increasing its production annually by an average of 140 thousand bbl/d. Production also increases in Colombia, Norway, and China. Production declines in Russia, Mexico, and the United Kingdom.
- EIA expects that OPEC members’ crude oil production will continue to rise over the next two years to accommodate increasing world oil consumption. Projected OPEC crude oil production increases by about 250 thousand bbl/d and 520 thousand bbl/d in 2012 and 2013, respectively. OPEC non-crude petroleum liquids (condensates, natural gas liquids, and gas-to-liquids), which are not subject to production targets, increase by 640 thousand bbl/d in 2012 and by 80 thousand bbl/d in 2013. EIA expects that OPEC surplus production capacity will increase from about 2.2 million bbl/d In December 2011 to 3.9 million bbl/d at the end of 2013, as the assumed recovery of Libyan production to pre-disruption levels allows other OPEC producers to scale back production.
- EIA estimates that commercial oil inventories held in the OECD ended 2011 at 2.64 billion barrels, equivalent to about 56.8 days of forward-cover (days-of-supply). Although the December 2011 inventory is slightly lower than the 2.66 billion barrel level at the end of December 2010, the days of forward-cover is the highest end-of-year level since 1994 because of a decline in OECD consumption last year. Projected OECD oil inventories decline slightly over the forecast, with OECD inventories falling to 2.59 billion barrels, or 55.5 days of forward cover, at the end of 2013.