WASHINGTON (MNI) – The following is the first part of excerpts from
the Energy Information Administration’s November Short-Term Energy
Outlook published Tuesday:

Crude Oil and Liquid Fuels Overview.

Growth in global oil consumption remains strong. In the current
Outlook, the projected growth in world real GDP (weighted by oil
consumption) is 3.9 percent in 2010. Continued upward revisions this
year’s world oil consumption, particularly for Europe and China, have
led to an expected world consumption growth of 2.0 million bbl/d for
2010. EIA expects this consumption growth in almost equal parts by a 1.0
million bbl/d increase in production from Organization of the Petroleum
Exporting Countries (OPEC) and 1.0 million bbl/d increase in non-OPEC
supply. While commercial oil inventories in the Organization for
Economic Cooperation and Development (OECD) countries remain high,
floating oil storage has been declining. EIA believes that the projected
gradual reduction in OECD oil inventories over the forecast period
should lend support to firming oil prices.

Global Crude Oil and Liquid Fuels Consumption.

EIA has revised world oil consumption growth in 2010 upward in
response to stronger-than-expected growth in European oil demand during
the second and third quarters of 2010, as well as continued strong
growth in China. The non-OECD regions, especially China, the Middle
East, and Brazil, represent most of the expected growth in world oil
consumption in 2011 (World Liquid Fuels Consumption Chart). Among the
OECD regions, EIA expects North America to show almost all the oil
consumption growth in 2011, with a gain of nearly 0.4 million bbl/d. In
2011, EIA expects global oil consumption growth of 1.4 million bbl/d.

Non-OPEC Supply.

Most of the 1.0 million bbl/d projected growth of non-OPEC supply
in 2010 comes from the United States, Brazil, and the former Soviet
Union. However, this growth in world supply is not sustained in the 2011
forecast. Total non-OPEC supply falls by 250,000 bbl/d in 2011,
primarily because of declining total North American and North Sea
production as well as decreasing supplies from Russia. This would be
only the third time in the last 15 years that non-OPEC supplies fall
year-over-year, following non-OPEC production declines in 2005 and 2008,
which were primarily the result of supply disruptions in the Gulf of
Mexico.

OPEC Supply.

OPEC left its production targets unchanged at its October meeting,
noting that global oil markets were well supplied. However, EIA projects
that OPEC crude oil production will increase by 0.3 and 0.5 million
bbl/d in 2010 and 2011, respectively. Projected OPEC non-crude
petroleum liquids production, which is not subject to OPEC production
quotas, increases by 0.7 million bbl/d in both 2010 and 2011. OPEC
surplus capacity should remain near 5 million bbl/d, compared with 4.3
million in 2009 and 1.5 million in 2008 (OPEC Surplus Crude Oil
Production Capacity Chart).

OECD Petroleum Inventories.

Commercial oil inventories held by OECD countries stood at an
estimated 2.76 billion barrels at the end of the third quarter of 2010,
equivalent to about 60 days of forward cover, and roughly 70 million
barrels more than the 5-year average for the corresponding time of year
(Days of Supply of OECD Commercial Stocks Chart). OECD oil inventories
decline through the forecast period, though days-forward-cover may
remain relatively high by historical standards.

Crude Oil Prices.

WTI crude oil spot prices averaged almost $82 per barrel in
October, about $7 per barrel higher than the September average, as
expectations of higher oil demand pushed up prices. EIA has raised the
average fourth-quarter 2010 WTI spot price forecast to about $83 per
barrel compared with $79 per barrel in last month’s Outlook. WTI spot
prices rise to $87 per barrel by the fourth quarter of next year.
Projected WTI prices average $79 per barrel in 2010 and $85 per barrel
in 2011.

Energy price forecasts are uncertain (Energy Price Volatility and
Forecast Uncertainty). WTI futures for January 2011 delivery (for the
5-day period ending November 4) averaged $85 per barrel, and implied
volatility a measure of price uncertainty – averaged 31 percent. This
made the lower and upper limits of the 95-percent confidence interval
for January 2011 contracts $69 per barrel and $103 per barrel,
respectively, for WTI delivered in January 2011. Last year at this
time, WTI for January 2010 delivery averaged $80 per barrel and implied
volatility averaged 41 percent, with the limits of the 95-percent
confidence interval at $61 per barrel and $104 per barrel.

U.S. Crude Oil and Liquid Fuels

U.S. Liquid Fuels Consumption.

Projected total U.S. liquid fuels consumption increases by 260,000
bbl/d (1.4 percent) in 2010, which is about 60,000 bbl/d higher than
forecast in last month’s Outlook. A year-over-year decline in total
liquid fuels consumption averaging 40,000 bbl/d in the first quarter of
2010 was followed by a year-over-year rise averaging 520,000 bbl/d in
the second and third quarters, led by increases in motor gasoline and
distillate fuel oil consumption. During 2010 as a whole, projected
gasoline consumption increases by 0.3 percent and distillate consumption
increases by 3.4 percent. Total liquid fuels consumption increases by a
further 120,000 bbl/d (0.6 percent) in 2011, as all of the major
petroleum products register consumption growth (U.S. Liquid Fuels
Consumption Growth Chart). Gasoline, distillate fuel, and jet fuel
consumption each increase by 0.7 percent in 2011.

U.S. Liquid Fuels Supply and Imports.

Domestic crude oil production, which increased by 410,000 bbl/d in
2009, increases by 140,000 bbl/d in 2010 (U.S. Crude Oil Production
Chart) and then falls by 40,000 bbl/d to 5.4 million bbl/d in 2011. The
2011 forecast includes declines of 50,000 bbld/d and 160,000-bbl/d in
Alaska and the Federal Gulf of Mexico (GOM), respectively, and a
170,000-bbl/d increase in lower-48 non-GOM production. Ethanol
production, which averaged 710,000 bbl/d in 2009, increases to an
average of 850,000 bbl/d in 2010 and 870,000 bbl/d in 2011.

Liquid fuel net imports (including both crude oil and refined
products) fell from 57 percent of total U.S. consumption in 2008 to 51
percent in 2009. EIA forecasts that liquid fuel net imports will
average about 50 percent of total consumption in 2010 and 2011.

U.S. Petroleum Product Prices.

Projected regular-grade gasoline retail prices rise from an average
$2.35 per gallon in 2009 to an average $2.77 per gallon in 2010 and
$2.97 per gallon in 2011. On-highway diesel fuel retail prices, which
averaged $2.46 per gallon in 2009, average $2.97 per gallon in 2010 and
$3.19 in 2011 in the current forecast. Projected refining margins, which
have been at their lowest levels since 2003, average about $2 per barrel
higher next year because of growing global product demand and shutdowns
of excess global refining capacity.

-more- (1 of 2)

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MI$OI$,MAUDS$]