WASHINGTON (MNI) – The following is the first part of excerpts from
the U.S. Energy Information Administration’s October Short-Term Energy
Outlook published Wednesday:

Global Crude Oil and Liquid Fuels

Crude Oil and Liquid Fuels Overview

The expected pace of global oil consumption growth for 2011 is
slightly lower in this month’s Outlook, while projected total supply in
2011 is higher, resulting in some easing of oil market tightness.
Despite this easing, EIA continues to expect markets to rely on
inventories to meet some consumption growth in 2011 and 2012. Oil
consumption growth from countries outside of the Organization for
Economic Cooperation and Development (OECD) is projected to outpace the
growth in supply from producers that are not members of the Organization
of the Petroleum Exporting Countries (OPEC), implying a need for OPEC
producers to increase their output to balance the market in 2011 and
2012.

Oil prices continue to face upward price pressure due to supply
uncertainty and downward price pressure because of lowering expectations
of economic growth. Upside uncertainty to the crude oil price outlook
remains as a result of ongoing unrest in oil-producing regions.
Heightened turmoil in Syria, which produced an average 400 thousand
bbl/d in 2010, and the potential for more sanctions on the countryfs
energy sector is one source of risk to non-OPEC supply. At the same
time, downside demand risks predominate, as fears persist about the rate
of global economic recovery, contagion effects of the debt crisis in the
European Union, and other fiscal issues facing national governments. On
the supply side, there may be downward price pressure if Libya is able
to ramp up oil production and exports sooner than anticipated.

Global Crude Oil and Liquid Fuels Consumption

EIA expects that world crude oil and liquid fuels consumption will
continue growing from its record-high level of 87.1 million barrels per
day (bbl/d) in 2010 and reach 88.4 million bbl/d on 2011 and 89.8
million bbl/d in 2012. Consumption in OECD countries is projected to
decline in both 2011 and 2012, while China and other emerging economies
account for all projected oil consumption growth through 2012.

Non-OPEC Supply

EIA projects that non-OPEC liquid fuels production will grow by
0.49 million bbl/d in 2011 and 0.85 million bbl/d to an average of 53.1
million bbl/d in 2012. The largest sources of expected growth in
non-OPEC oil production over the forecast period are Brazil, Canada,
China, Colombia, Kazakhstan, and the United States, with average annual
growth in each country of over 100 thousand bbl/d. In contrast, Russian,
Mexican, and North Sea production will be lower by the end of the
forecast period.

OPEC Supply

EIA expects OPEC crude oil production to decline by 30 thousand
bbl/d in 2011. This is in sharp contrast to the last Outlook, in which
EIA expected total OPEC crude oil production to decline by 360 thousand
bbl/d. The significant change in this Outlook for 2011 is largely due to
increased production in Saudi Arabia, which rose to 9.9 million bbl/d in
the third quarter of this year, compared with 9.1 million bbl/d in the
second quarter. EIA maintains its assumption that about one-half of
Libya.s pre-disruption production will resume by the end of 2012,
contributing to the overall growth in OPEC crude oil output of 270
thousand bbl/d in 2012. EIA expects that OPEC surplus crude oil
production capacity fell from 4.0 million bbl/d in the fourth quarter of
2010 to 2.8 million bbl/d in the fourth quarter of 2011, but will
increase to 3.5 million bbl/d by the end of 2012 as Libyan production
capacity comes back on line. Forecast OPEC non-crude liquids production,
which is not subject to production targets, is expected to increase by
450 thousand bbl/d in both 2011 and 2012.

OECD Petroleum Inventories

EIA expects that OECD commercial inventories will decline in both
2011 and 2012. Days of supply (total inventories divided by average
daily consumption) fall slightly but remain relatively high at 58 days
during the fourth quarter of 2010, 57 days during the fourth quarter
2011, and 56 days during the fourth quarter 2012. Crude Oil Prices. West
Texas Intermediate (WTI) crude oil spot prices fell from an average of
$97 per barrel in July to $86 per barrel in August and September. The
WTI spot price began October below $80 per barrel. EIA revised the
projected oil price paths downward from last month’s Outlook. EIA
expects that the U.S. refiner average crude oil acquisition cost will
average about $99 per barrel in 2011 and $98 per barrel in 2012 compared
with $100 per barrel and $103 per barrel for 2011 and 2012,
respectively, in last month’s Outlook.

Crude Oil Prices

West Texas Intermediate (WTI) crude oil spot prices fell from an
average of $97 per barrel in July to $86 per barrel in August and
September (West Texas Intermediate Crude Oil Price Chart). The WTI spot
price began October below $80 per barrel. EIA revised the projected oil
price paths downward from last months Outlook. EIA expects that the
U.S. refiner average crude oil acquisition cost will average about $99
per barrel in 2011 and $98 per barrel in 2012 compared with $100 per
barrel and $103 per barrel for 2011 and 2012, respectively, in last
months Outlook.

The significant price discount for WTI relative to other U.S. and
world crude oils is expected to continue until transportation
bottlenecks restricting the movement of crude oil out of the
mid-continent region are relieved. Consequently, the projected average
U.S. refiner acquisition cost of crude oil, which averaged almost $2.70
per barrel below WTI in 2010, averages about $7 per barrel above WTI in
2011 and $10 per barrel above WTI in 2012.

Energy price forecasts are highly uncertain. WTI futures for
December 2011 delivery over the 5-day period ending October 6 averaged
$79 per barrel and implied volatility averaged 51 percent, establishing
the lower and upper limits of a 95-percent confidence interval for the
market.s expectations of monthly average WTI prices in December of $57
per barrel and $110 per barrel, respectively. Last year at this time,
WTI for December 2010 delivery averaged $83 per barrel and implied
volatility averaged 30 percent. The corresponding lower and upper limits
of the 95-percent confidence interval were $68 per barrel and $101 per
barrel.

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

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