Crude Oil and Liquid Fuels Overview.
EIA projects that total world oil consumption will grow by 1.7 million barrels per day (bbl/d) in 2011, which is about 0.3 million bbl/d higher than last month's Outlook, primarily because of higher forecasts of consumption for electricity generation in China, Japan, and the Middle East. Projected world consumption increases by 1.6 million bbl/d in 2012, unchanged from last month's Outlook. Projected supply from non-OPEC countries increases by an average of about 0.6 million bbl/d in 2011 and 0.5 million bbl/d in 2012.
EIA expects that the market will rely on both a drawdown of inventories and increases in production from both OPEC and non-OPEC countries to meet projected demand growth. While OPEC crude oil production declines 0.4 million bbl/d in 2011 because of the disruption forecast to Libyan production, OPEC non-crude liquids production grows by 0.6 million bbl/d. EIA expects the world crude oil market will continue to tighten in 2012, with forecast OPEC crude oil production increasing by 0.7 million bbl/d and OPEC non-crude production growing by 0.4 million bbl/d.
Among the major uncertainties that could push crude oil prices above or below our current forecast are: continued unrest in producing countries and its potential impact on supply; decisions by key OPEC-member countries regarding their production in response to the global increase in oil demand; the rate of economic growth, both domestically and globally; fiscal issues facing national and sub-national governments; and China's efforts to address concerns regarding its growth and inflation rates.
Global Crude Oil and Liquid Fuels Consumption.
EIA expects that world liquid fuels consumption, which reached a record level of 86.7 million barrels per day in 2010, will grow by 1.7 million bbl/d in 2011 and by an additional 1.6 million bbl/d in 2012, resulting in total world consumption of 90.0 million bbl/d in 2012. Countries outside the Organization for Economic Cooperation and Development (OECD) will make up almost all of the growth in consumption over the next two years, with the largest increases coming from China, Brazil, and the Middle East. Forecasts of 2011 consumption in China, Japan, and the Middle East were raised by 120 thousand bbl/d, 80 thousand bbl/d, and 110 thousand bbl/d, respectively,from last month's Outlook because of higher expected demand for petroleum-fueled electric power generation. EIA now expects consumption in China to increase by 700 thousand bbl/d in 2011.
Non-OPEC Supply.
EIA projects that non-OPEC crude oil and liquid fuels production will increase by 590 thousand bbl/d in 2011 and by 490 thousand bbl/d in 2012. The greatest increases in non-OPEC oil production during 2011 occur in Brazil (130 thousand bbl/d), Canada (170 thousand bbl/d), China (140 thousand bbl/d), Colombia (110 thousand bbl/d) and countries that were formerly part of the Soviet Union (210 thousand bbl/d). In 2012, EIA expects production growth to remain strong in Canada, China, Brazil, and Colombia, but forecast production growth in the former Soviet Union countries slows to 80 thousand bbl/d. Other non-OPEC areas are expected to decline, including a decrease in North Sea production of 110 thousand bbl/d in 2011 and a further decrease of 200 thousand bbl/d in 2012.
OPEC Supply.
Forecast OPEC crude oil production declines by 370 thousand bbl/d in 2011, followed by an increase of 660 thousand bbl/d in 2012. EIA assumes that about one-half of Libya's pre-disruption production will resume by the end of 2012. Estimated OPEC crude oil production during the first quarter of 2011 averaged almost 30 million bbl/d. EIA projects that OPEC surplus capacity will fall from 4.0 million bbl/d at the end of 2010 to 3.6 million bbl/d at the end of 2011, followed by a further decline to 3.1 million bbl/d by the end of 2012. Estimated OPEC production of non-crude liquids totals 6.0 and 6.4 million bbl/d in 2011 and 2012, respectively.
OECD Petroleum Inventories.
EIA expects that OECD inventories will decline in 2011 following the steep drop in floating storage that has already occurred. Projected onshore OECD stocks fall by about 120 million barrels in 2011, followed by an additional 110 million-barrel decline in 2012. Days of supply (total inventories divided by average daily consumption) drops from a relatively high 57.9 days during the fourth quarter of 2010 to 54.6 days in the fourth quarter of 2011, and 52.4 days of supply in the fourth quarter of 2012.
Crude Oil Prices.
WTI crude oil spot prices averaged $103 per barrel inMarch, $110 per barrel in April, and $101 per barrel in May. The WTI crude oil price was $113 per barrel at the beginning of May but fell to $97 per barrel by the end of the first week of the month. For the remainder of May, WTI prices fluctuated within a relatively narrow range of between $96 and $103 per barrel. EIA still expects oil markets to tighten as growing liquid fuels demand in the emerging economies and slowing growth in non-OPEC supply maintain upward pressure on oil prices. EIA expects that WTI spot prices, which averaged $79 per barrel in 2010, will average $102 per barrel in 2011 and $107 per barrel in 2012, about the same as expected in last month's Outlook (West Texas Intermediate Crude Oil Price Chart).
Growing volumes of Canadian crude oil imported into the United States contributed to record-high storage levels at Cushing, Oklahoma of over 41 million barrels at the end of March 2011 (86 percent of working capacity at Cushing), and a price discount for WTI compared with similar-quality world crudes such as Brent. A discount for WTI is expected to persist until transportation bottlenecks impacting the movement of mid-continent crude oil to the Gulf coast are relieved. Consequently, the projected U.S. refiner average acquisition cost of crude oil, which was about $2.70 per barrel below WTI in 2010, is $1.60 per barrel above WTI in 2011 and $1.10 per barrel above WTI in 2012.
Energy price forecasts are highly uncertain (Energy Price Volatility and Forecast Uncertainty). WTI futures for August 2011 delivery over the 5-day period ending June 2 averaged $101.49 per barrel and implied volatility averaged 29 percent, establishing the lower and upper limits of a 95-percent confidence interval for the market's expectations of monthly average WTI prices in July of $83 per barrel and $124 per barrel, respectively. Last year at this time, WTI for August 2010 delivery averaged $75 per barrel and implied volatility averaged 39 percent. The corresponding lower and upper limits of the 95-percent confidence interval were $58 per barrel and $97 per barrel.
U.S. Crude Oil and Liquid Fuels, U.S. Liquid Fuels Consumption.
Total consumption of liquid fuels increased by 270 thousand bbl/d (1.4 percent) during the first quarter 2011 over the same period the year before (U.S. Liquid Fuels Consumption Growth Chart). Consumption growth during the first quarter was led by distillate fuel oil (160 thousand bbl/d) and liquefied petroleum gas (70 thousand bbl/d). Motor gasoline consumption fell by 50 thousand bbl/d. Consumption growth is expected to slow over the forecast. Projected total U.S. liquid fuels consumption increases by an average 150 thousand bbl/d (0.8 percent) in 2011, and by a further 130 thousand bbl/d (0.7 percent), to 19.4 million bbl/d in 2012, which is still well below the record-high 20.8 million bbl/d in 2005. Distillate fuel, buoyed by continued increases in industrial production, accounts for two thirds of the projected increase in liquid fuels consumption in 2011. Motor gasoline is the fastest growing consumption category in 2012, reflecting growing population, rising employment and income, and a predicted end to the recent steep run-up in retail gasoline prices. For the latest updates PRESS CTR + D or visit Stock Market news Today
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