EIA sees oil consumption outpacing production; oil stocks grow

EIA releases latest short-term projections

Global equities declined strongly over the last 24 hours as shown in the EMI Global Equity Index table below. With yesterday's almost 2% decline the Index is now 4% off of its year to date highs. The gain for 2012 is now at 10.9%. The magnitude of the correction of about 4% is the lower end of the range many analysts have been calling for with an upper range correction level at the 7%-8%. So potentially there is more to come if the economic data does not improve going forward.

Yesterday the EIA released their latest monthly Short Term Energy Outlook. Following are the highlights from the report.

EIA expects increases in global consumption to outpace production growth in countries outside of the Organization of the Petroleum Exporting Countries (OPEC) during the forecast period. World liquid fuels consumption grows by an annual average of 1.1 million barrels per day (bbl/d) in 2012 and 1.4 million bbl/d in 2013. Supply from non-OPEC countries increases by 0.7 million bbl/d in 2012 and by 0.8 million bbl/d in 2013. EIA expects that the market will rely on both inventories and increases in crude oil and non-crude liquids production from OPEC members to meet world demand growth.

Significant uncertainties could push oil prices higher or lower than projected. A number of non-OPEC countries are currently undergoing supply disruptions. Oil prices could be higher than projected in this Outlook if current disruptions intensify, new non-OPEC projects come online more slowly than expected, or OPEC members do not increase production. On the demand side, if the pace of global economic growth fails to recover in countries belonging to the Organization for Economic Cooperation and Development (OECD), or if economic growth slows in non-OECD countries, prices could be lower.

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 89.0 million bbl/d in 2012 and 90.3 million bbl/d in 2013. Non-OECD countries will account for essentially all of the world’s consumption growth over the next two years, with the largest contributions coming from China, the Middle East, and Central and South America

EIA expects non-OPEC crude oil and liquid fuels production to rise by 690 thousand bbl/d in 2012 and by a further 750 thousand bbl/d in 2013. The largest area of forecast non-OPEC growth will be North America, where production increases by 360 thousand bbl/d and 190 thousand bbl/d in 2012 and 2013, respectively, resulting from continued production growth from U.S. onshore shale formations and Canadian oil sands. EIA expects that Kazakhstan, which will commence commercial production in the Kashagan field in the next year, will increase its total production annually by an average of 170 thousand bbl/d in both 2012 and 2013. In Brazil, production increases annually by an average of 120 thousand bbl/d over the next two years, with increased output from its offshore, pre-salt oil fields. Production also increases in Colombia and China over the next two years, while production declines in Russia, Mexico, and the North Sea.

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