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

Crude Oil and Liquid Fuels Overview.

Gradual tightening in global oil markets continues to support world
oil prices. Projected liquid fuels consumption growth of 2 million
barrels per day (bbl/d) in 2010 is almost double the growth in supply
from countries outside of the Organization of the Petroleum Exporting
Countries (OPEC), which has led to rising demand for OPEC crude oil
production and declining global oil inventories. While overall
commercial oil inventories in the Organization for Economic Cooperation
and Development (OECD) countries remain high, stock levels are unevenly
distributed with some regions experiencing tightness in recent months.
Both floating and reported on-shore inventories have been declining, and
EIA believes that the projected continued reduction in OECD stocks over
the forecast period should lend support to firming oil prices.

Global Crude Oil and Liquid Fuels Consumption.

Projected world liquid fuels consumption increases by 2 million
bbl/d in 2010, following declines in 2008 and 2009. As a result, total
global consumption in 2010 should be close to the 2007 level. Global oil
consumption growth slows to 1.4 million bbl/d in 2011. Non-OECD regions,
especially China, the Middle East, and Brazil, represent most of the
expected growth in world oil consumption next year. Among the countries
of the OECD, only the United States is expected to show any significant
growth in consumption volume in 2011 at about 0.2 million bbl/d.

Non-OPEC Supply.

EIA projects the total non-OPEC supply of crude oil will grow by
just over 1.0 million bbl/d to an average 51.5 million bbl/d in 2010 –
the largest year-over-year increase since 2002. The increase in total
non-OPEC supply for the year is the result of higher production in the
United States, Brazil, China, and Russia. However, non-OPEC supply falls
by 280,000 bbl/d in 2011. The decline in non-OPEC supply in 2011 would
be only the third time in the last 15 years that non-OPEC supplies fall
year-over-year. Previous declines in 2005 and 2008 were primarily the
result of supply disruptions in the Gulf of Mexico related to
hurricanes.

OPEC Supply.

EIA expects that OPEC crude oil production will increase by 0.3 and
0.4 million bbl/d in 2010 and 2011, respectively, similar to last
month’s Outlook, to accommodate increasing world oil consumption.
Projected non-crude liquids increase by 0.7 million bbl/d in both 2010
and 2011. OPEC surplus capacity should remain close to 5 million bbl/d,
compared with 4.3 million in 2009 and 1.5 million in 2008.

OECD Petroleum Inventories.

Commercial oil inventories held by OECD countries at the end of
2010 are an estimated 2.73 billion barrels, equivalent to about 58 days
of forward cover and roughly 94 million barrels more than the 5-year
average for the corresponding time of year. OECD oil inventories decline
through the forecast period, though days of forward cover should remain
high by historical standards.

Crude Oil Prices.

WTI crude oil spot prices averaged over $84 per barrel in November,
more than $2 per barrel higher than the October average, as expectations
of higher oil demand pushed up prices. EIA has raised the average winter
2010-2011 WTI spot price forecast by $1 per barrel from the last month’s
Outlook to $84 per barrel. WTI spot prices rise to $89 per barrel by the
end of next year, $2 per barrel higher than in the last Outlook.
Projected WTI prices average $79 per barrel in 2010 and $86 per barrel
in 2011.

Energy price forecasts are uncertain. WTI futures for February 2011
delivery for the 5-day period ending December 2 averaged $86 per barrel,
and implied volatility averaged 30 percent. This made the lower and
upper limits of the 95-percent confidence interval $70 per barrel and
$106 per barrel, respectively, for WTI delivered in February 2011. Last
year at this time, WTI for February 2010 delivery averaged $78 per
barrel and implied volatility averaged 40 percent, with the limits of
the 95-percent confidence interval at $61 per barrel and $102 per
barrel.

U.S. Liquid Fuels Consumption.

Projected total U.S. liquid fuels consumption increases by 320,000
bbl/d (1.7 percent) to 19.09 million bbl/d 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 610,000 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 0.4 percent and distillate consumption increases by 4.0
percent. Total liquid fuels consumption increases by a further 160,000
bbl/d (0.8 percent) in 2011, as all of the major petroleum products
register consumption growth. Gasoline consumption grows by 0.8 percent,
and distillate fuel consumption increases by 1.7 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 and then falls by 30,000 bbl/d
to 5.47 million bbl/d in 2011. The 2011 forecast includes declines of
50,000 bbl/d and 180,000 bbl/d in Alaska and the Federal Gulf of Mexico
(GOM), respectively, and a 190,000-bbl/d increase in lower-48 non-GOM
production. Ethanol production, which averaged 710,000 bbl/d in 2009,
increases to an average of 860,000 bbl/d in 2010 and 890,000 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, primarily because of the decline in consumption during
the recession. EIA forecasts that liquid fuel net imports will average
9.48 million bbl/d in 2010 and 9.62 million bbl/d in 2011, about 50
percent of total consumption in both years.

U.S. Petroleum Product Prices.

Projected regular-grade gasoline retail prices rise from an average
of $2.35 per gallon in 2009 to an average of $2.77 per gallon in 2010
and $3.00 per gallon in 2011. On-highway diesel fuel retail prices,
which averaged $2.46 per gallon in 2009, average $2.98 per gallon in
2010 and $3.23 in 2011 in the current forecast. Refining margins, which
had been at their lowest levels since 2003, average about $2 per barrel
higher next year because of growing global product demand.

-more- (1 of 2)

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

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