EIA expects oil production to outpace consumption in 2013 and 2014

The EIA released their latest Short Term Energy Outlook yesterday afternoon. Overall I would view the report as bearish as they increased their projection of US domestic crude production strongly while still forecasting only a very slow increase in consumption over the next two years. On a global basis they are expecting global supply to offset higher global consumption for both 2013 and 2014. Following are the main oil related highlights from the report.

  • EIA expects oil markets to loosen in 2013 and 2014 as increasing global supply more than offsets higher global consumption. Projected world supply increases by 1.0 million bbl/d in 2013 and 1.7 million bbl/d in 2014, with most of the growth coming from outside the Organization of the Petroleum Exporting Countries (OPEC). North America will account for much of this growth. Projected world liquid fuels consumption grows by an annual average of 0.9 million barrels per day (bbl/d) in 2013 and 1.3 million bbl/d in 2014. Countries outside the Organization for Economic Cooperation and Development (OECD) drive expected consumption growth.
  • World liquid fuels consumption grew by an estimated 0.9 million bbl/d in 2012 to reach 89.2 million bbl/d. EIA expects that this growth will remain about the same over the next year before picking up again in 2014 due to a moderate recovery in global economic growth; consumption reaches 90.1 million bbl/d in 2013 and 91.5 million bbl/d in 2014. Non-OECD Asia is the leading regional contributor to expected global consumption growth. OECD liquid fuels consumption declined by 0.4 million bbl/d in 2012. EIA projects OECD consumption to further decline by 0.3 million bbl/d in 2013, as modest consumption growth in North America is more than offset by decreasing consumption in Europe. The OECD consumption decline narrows to 0.1 million bbl/d in 2014 as European consumption begins to flatten in response to higher economic growth. EIA projections do not assume any significant deterioration of the economic situation in the United States or the European Union (EU) next year.
  • Although supply growth in the United States and Russia during 2012 outpaced our forecast at the beginning of the year, overall non-OPEC liquid fuels production fell below the year-ago expectations. EIA forecasts non-OPEC production to increase by 1.4 million bbl/d in 2013 and 1.3 million bbl/d in 2014, but assumptions about the mitigation of some of the current political impediments to production and the rapid evolution of the North American oil industry introduce considerable risks to the forecast. North America accounts for about two-thirds of the projected growth in non-OPEC supply over the next two years because of continued production growth from U.S. tight oil formations and Canadian oil sands.
  • EIA expects U.S. crude oil production to continue to grow rapidly over the next two years, increasing from an average 6.4 million bbl/d in 2012 to average 7.3 million bbl/d in 2013, an increase of about 0.3 million bbl/d from last month's STEO, and 7.9 million bbl/d in 2014. Central to this projected growth will be ongoing development activity in key onshore basins. Drilling in tight oil plays in the Williston, Western Gulf, and Permian Basins is expected to account for the bulk of forecast production growth over the next two years.
  • EIA expects that OPEC members will continue to produce at least 30 million bbl/d of crude oil over the next two years to accommodate the projected increase in world oil consumption and to counterbalance supply disruptions. However, OPEC crude supply decreases by 0.6 million bbl/d in 2013 and stays flat through 2014. Most of the decrease in 2013 comes from Saudi Arabia, which responds to non-OPEC growth and increasing production from some OPEC members, such as Iraq, Nigeria, and Angola.
  • EIA estimates that OECD commercial oil inventories ended 2012 at 2.67 billion barrels, equivalent to 58 days of supply. Projected OECD oil inventories remain relatively flat throughout the next year and end 2013 at 2.66 billion barrels (58 days of supply). Inventories grow to 2.69 billion barrels (59 days of supply) by the end of 2014.
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