WASHINGTON (MNI) – The following is the first part of excerpts from
the Energy Information Administration’s July Short-Term Energy Outlook
published Wednesday:
Crude Oil and Liquid Fuels Overview.
EIA’s view of the world oil market is largely unchanged from recent
Outlooks. EIA forecasts that world oil prices will rise slowly as an
expected renewal of global economic growth leads to higher world oil
demand and members of the Organization of the Petroleum Exporting
Countries (OPEC) continue their support of prices near current levels.
Global Crude Oil and Liquid Fuels Consumption.
EIA projects world oil consumption to grow by about 1.5 million
bbl/d in both 2010 and 2011, mostly unchanged from last month’s Outlook.
However, estimates for oil consumption in 2009 were revised upwards,
with these changes carried through the forecast period. Consequently,
the level of forecasted demand in 2010 and 2011 is higher than last
month’s Outlook. Countries outside of the Organization for Economic
Cooperation and Development (OECD) represent nearly all of the expected
growth in world oil consumption, led by China, Saudi Arabia, and Brazil
(World Liquid Fuels Consumption Chart).
Non-OPEC Supply.
EIA has revised its forecast of non-OPEC supply upwards from the
last Outlook, with non-OPEC supply now expected to increase by 0.6
million bbl/d in 2010 and decline by less than 0.1 million bbl/d in
2011. The forecast for oil production in Mexico is more optimistic than
last month. Data for the first half of the year have been higher than
expected, as recent decline rates at the Cantarell field have fallen and
the country has boosted output from other offshore areas. Nonetheless,
oil production in Mexico is still expected to fall by 0.1 million bbl/d
in 2010 and roughly 0.2 million bbl/d in 2011. Over the forecast
period, Brazil, the United States, and Azerbaijan should provide the
largest sources of non-OPEC supply growth.
OPEC Supply.
The 12 members of OPEC produced an estimated 29.4 million bbl/d of
crude oil in the second quarter of 2010. After remaining relatively
steady for the past four quarters, EIA expects OPEC crude oil production
to rise slightly through 2011 to accommodate increasing world oil
consumption and maintain the organization’s market objectives. Even
with the increase in crude oil production, OPEC surplus capacity should
remain over 5 million bbl/d in 2010 and 2011, versus 4.3 million bbl/d
in 2009 and 1.5 million bbl/d in 2008. OPEC production of non-crude
petroleum liquids, which are not subject to OPEC production targets, are
expected to increase by 0.6 million bbl/d in 2010 and 0.7 million bbl/d
in 2011.
OECD Petroleum Inventories.
Commercial oil inventories held in the OECD stood at about 2.7
billion barrels at the end of the first quarter of 2010, equivalent to
about 57 days of forward cover, and roughly 67 million barrels more than
the 5-year average for the corresponding time of year. The level of OECD
oil inventories is expected to decline through the forecast period,
though days-forward-cover should remain high due to falling OECD oil
consumption.
Crude Oil Prices.
WTI crude oil spot prices averaged $75.34 per barrel in June 2010
($1.60 per barrel above the prior month’s average), close to the $76 per
barrel projected in the forecast in last month’s Outlook. EIA projects
WTI prices will average about $79 per barrel over the second half of
this year and rise to $84 by the end of next year.
Energy price forecasts are highly uncertain, as history has shown
(Energy Price Volatility and Forecast Uncertainty). WTI futures for
September 2010 delivery for the 5-day period ending July 1 averaged $77
per barrel, and implied volatility averaged 35 percent. This made the
lower and upper limits of the 95-percent confidence interval $60 and $98
per barrel, respectively.
Last year at this time, WTI for September 2009 delivery averaged
$70 per barrel, and implied volatility averaged 44 percent, rendering
the limits of the 95-percent confidence interval $52 and $95 per barrel.
U.S. Crude Oil and Liquid Fuels
U.S. Liquid Fuels Consumption.
U.S. liquid fuels consumption is beginning to show signs of
recovery after having fallen by 810,000 bbl/d in 2009, the fourth
consecutive annual decline. The year-over-year decline in total liquid
fuels consumption slowed to 20,000 bbl/d in the first quarter of 2010.
Total consumption for the second quarter, however, rose by 500,000 bbl/d
compared with the same period last year. For the year as a whole,
projected total liquid fuels consumption grows by 200,000 bbl/d in 2010
and by 170,000 bbl/d in 2011 as all of the major petroleum products
register consumption growth in each of those years.
U.S. Liquid Fuels Supply and Imports.
Projected domestic crude oil production increases by 75,000 bbl/d
in 2010. Based on the forecast of a more active hurricane season by the
National Oceanic and Atmospheric Administration (NOAA), EIA estimates a
median outcome of 26 million barrels of total shut-in crude oil
production because of tropical storm activity in the Gulf of Mexico this
year.
Reversing a pattern of increases over several years, forecast crude
oil production in 2011 falls by 26,000 bbl/d to 5.37 million bbl/d. The
lower production forecast includes EIA’s estimates of reductions in the
output of crude oil from the deepwater Gulf of Mexico of 31,000 bbl/d in
the fourth quarter of 2010 and 82,000 bbl/d in 2011 because of the
recently imposed 6-month drilling moratorium. The reductions in crude
oil production increase from a monthly average of about 10,000 bbl/d in
September 2010 to nearly 100,000 bbl/d by December 2011.
Projected ethanol production, which averaged 700,000 bbl/d in 2009,
increases to an average of 850,000 bbl/d in 2010 and 880,000 bbl/d in
2011. EIA forecasts that liquid fuel net imports (including both crude
oil and refined products), which declined by 1.4 million bbl/d in 2009,
will fall by a further 110,000 bbl/d in 2010. In 2011, projected total
liquid fuel net imports increase by 80,000 bbl/d.
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** Market News International Washington Bureau: 202-371-2121 **
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