Analysis & Projections

The Availability and Price of Petroleum and Petroleum Products Produced in Countries Other Than Iran

Release date: June 26, 2014
Next release date: August 28, 2014

May - June 2014 Update

  • The U.S. Energy Information Administration (EIA) estimates that the global petroleum and other liquids1 production outpaced consumption in May and June, resulting in a 0.2-million-barrel per day (b/d) average implied build in global oil stocks (Table 1, Figure 1). Despite the implied build in global stocks, unplanned global supply disruptions remain elevated and surplus crude oil production capacity remains low relative to the previous three-year average, contributing to continued general market tightness in the context of rising geopolitical uncertainty.
  • North Sea Brent crude oil prices increased in June to their highest levels so far this year on concerns that recent unrest in parts of Iraq could adversely affect Iraq's oil production in the near future. The Brent front month futures contract averaged about $114.50 per barrel for the five-trading-days ending June 24, nearly $5/barrel higher compared with the average price for the five-trading-days ending April 24 (Figure 2).
  • The escalation of violence in northern Iraq that started in June has not reduced the availability of oil to the global market as southern exports have been unaffected and northern exports were already halted since early March 2014. The northern Baiji refinery (which had been averaging runs of approximately 0.2 million b/d in the first half of 2014) was shut down during the second half of June, which led to the almost complete halt in northern Iraqi crude and petroleum product production (not including volumes being produced in the Kurdistan Regional Government areas). The northern crude production loss contributed to an average monthly increase of 0.1 million b/d to Iraq's unplanned crude oil supply disruptions, estimated to average 0.5 million b/d in June. The remainder of the outage volume reflects the effective capacity of the Iraq-Turkey pipeline, which transported northern Iraqi crude to global markets but has been offline since early March 2014 due to attacks by militants that reduced crude oil production.
  • The situation in Iraq is critical for oil markets because the country has been, and is projected to remain, the main source of crude oil production capacity growth among members of the Organization of the Petroleum Exporting Countries (OPEC) due to rising export capability in the south. EIA estimates show that Iraq's crude production grew by roughly 0.7 million b/d from 2011 to the first quarter of 2014. EIA has projected that Iraq's crude oil production should grow by an average of 0.3 million b/d in both 2014 and 2015. However, if the crisis spreads to the southern Basrah region, the oil sector will be at a greater risk of a major supply disruption and the forecast short-term growth, which was already a conservative projection, may not be realized. EIA will monitor the situation and make adjustments to its forecast accordingly.
  • Global petroleum and other liquids2 consumption in May and June averaged 91.4 million b/d, 0.6 million b/d higher than the previous two-month period and 1.4 million b/d higher than the same time last year. Developing and emerging countries accounted for almost all of the consumption growth, led by China (Table 2).
  • Global petroleum and other liquids production in May and June averaged 91.6 million b/d, 0.6 million b/d higher than the previous two-month period and 1.2 million b/d higher than the same time last year. Non-OPEC production grew by 2.0 million b/d compared with the same time last year, more than offsetting lower crude oil output from OPEC countries, particularly Libya (Table 3).
  • Global surplus crude oil production capacity averaged 2.1 million b/d in May and June, roughly the same as the average during the previous two-month period and the year-ago level (Table 3). The estimate of effective surplus capacity does not include additional capacity that may be technically available in Iran, but which is offline because of the effects of U.S. and European Union (EU) sanctions on Iran’s ability to sell its oil.
  • Although global inventory builds are similar to this time last year, global crude oil markets remain tight due to current and potential future unplanned production outages. In response, backwardation (when near-term prices are greater than further dated ones) in the Brent futures curve has increased. The 1st-13th month spread for the Brent futures curve averaged about $6/barrel for the five-trading-days ending June 24, $0.50/barrel higher compared with the five-trading-day-period ending April 24 and about $2/barrel higher compared with this time last year (Figure 3).
  • OPEC crude oil supply disruptions averaged 2.7 million b/d in May and June, 0.1 million b/d higher than the previous two-month average and 1.2 million b/d higher the same time last year, mainly due to substantial disruptions to Libya's production since late-July 2013 (Figure 4). Unplanned supply disruptions among non-OPEC producers averaged 0.7 million b/d in May and June, slightly higher than the previous two-month average but more than 0.2 million b/d lower than the same time last year, when there were outages in the United States, Canada, and China (Figure 5). EIA's estimates of unplanned outages account for crude oil only among OPEC producers and all liquid fuels among non-OPEC producers. These estimates of unplanned outages exclude normal maintenance and reflect the level of volumes shut in relative to an assessment of effective production capacity, which is periodically updated.
  • Iran’s petroleum and other liquids production averaged 3.4 million b/d in May and June, of which 2.8 million b/d was crude oil. Iran's liquid fuels production remains below the previous three-year average of 3.6 million b/d, but 0.2 million b/d higher than the year-ago level of 3.2 million b/d (Table 1). Export data for 2014 shows a corresponding increase in Iran's crude oil and condensate exports compared with last year. Iran’s crude oil production and exports in 2012 and 2013 were reduced by sanctions that impeded its ability to carry out investment in oil projects necessary to offset natural declines in production and also limited Iran’s ability to sell oil. The Joint Plan of Action (JPOA) between the five permanent members of the United Nations Security Council (the United States, United Kingdom, France, Russia, and China) plus Germany (P5+1) and Iran that came into effect on January 20, 2014, provides limited sanctions relief to Iran, while leaving in place the core oil sector sanctions.
  • EIA has revised the preliminary estimates of petroleum and other liquids production and consumption for March and April 2014 published in the previous edition of this report. Global petroleum and other liquids production was revised upward by 0.1 million b/d to average 90.9 million b/d, while global consumption was revised downward by 0.2 million b/d to average 90.7 million b/d. EIA has also reduced its estimate for Iranian total liquid fuels production in 2013 by 0.2 million b/d to 3.2 million b/d based on a review of annual production and export data from multiple sources.
Table 1. Summary of Estimated Petroleum and Other Liquids Quantities and Prices
Item May 2014 June 2014 May - June
2014 Average
May - June
2013 Average
2011 - 2013 Average
Global Petroleum and Other Liquids (million barrels per day)
Global Petroleum and Other Liquids Production (a) 91.5 91.6 91.6 90.3 89.3
Global Petroleum and Other Liquids Consumption (b) 90.9 91.8 91.4 89.9 89.4
Biofuels Production (c) 2.2 2.2 2.2 2.2 1.9
Biofuels Consumption (c) 1.9 2.0 1.9 1.9 1.8
Iran Liquid Fuels Production 3.4 3.3 3.4 3.2 3.6
Iran Liquid Fuels Consumption 1.6 1.7 1.7 1.7 1.7
Petroleum and Petroleum Products Produced and Consumed in Countries Other Than Iran (million barrels per day)
Production (d) 85.9 86.1 86.0 84.9 83.8
Consumption (d) 87.4 88.2 87.7 86.3 85.8
Production minus Consumption -1.4 -2.0 -1.7 -1.3 -2.1
World Inventory Net Withdrawals Including Iran -0.6 0.2 -0.2 -0.4 0.1
Estimated OECD Inventory Level (e) (million barrels) 2,606 2,613 2,610 2,641 2,659
Surplus Production Capacity (million barrels per day)
OPEC Surplus Crude Oil Production Capacity (f) 2.1 2.1 2.1 2.1 2.4
Oil Price Level
WTI Front Month Futures Price (g) ($ per barrel) 101.79 104.98 103.26 95.28 95.77
Brent Front Month Futures Price (h) ($ per barrel) 109.24 111.67 110.36 103.31 110.43
RBOB Front Month Futures Price (i) ($ per gallon) 2.96 3.03 2.99 2.83 2.86
Oil Price Time Spread
WTI 1st - 13th Month Futures Spread ($ per barrel) 9.67 10.29 9.96 4.24 0.41
Brent 1st - 13th Month Futures Spread ($ per barrel) 6.05 6.03 6.04 3.82 4.86
Note: The term "petroleum and other liquids" encompasses crude oil, lease condensate, natural gas liquids, biofuels, coal-to-liquids, gas-to-liquids, and refinery processing gains, which are important to consider in concert due to the inter-related supply, demand, and price dynamics of petroleum, petroleum products, and related fuels.
(a) Production includes crude oil (including lease condensates), natural gas liquids, other liquids, and refinery processing gains.
(b) Consumption of petroleum by the OECD countries is synonymous with "products supplied," defined in the glossary of the EIA Petroleum Supply Monthly, DOE/EIA-0109. Consumption of petroleum by the non-OECD countries is "apparent consumption," which includes internal consumption, refinery fuel, and loss, and bunkering.
(c) Biofuels production and consumption are based on EIA estimates as published in the International Energy Statistics. Biofuels production in the third quarter tends to be at its highest level in the year as ethanol production in Brazil reaches its seasonal peak and is typically lowest in the first quarter as seasonal production falls in the South/South-Central region of Brazil.
(d) Global production of petroleum and petroleum products outside of Iran is derived by subtracting biofuels production and Iran liquid fuels production from global liquid fuels production. The same method is used to calculate global consumption outside of Iran.
(e) Estimated inventory level is for OECD countries only.
(f) EIA defines surplus oil production capacity as potential oil production that could be brought online within 30 days and sustained for at least 90 days, consistent with sound business practices. This does not include oil production increases that could not be sustained without degrading the future production capacity of a field. It also does not include additional capacity that may be available in Iran, but which is currently offline due to the impacts of U.S. and EU sanctions on Iran's ability to sell its oil.
(g)WTI refers to West Texas Intermediate crude oil traded on the New York Mercantile Exchange (NYMEX), owned by Chicago Mercantile Exchange (CME) Group.
(h) Brent refers to Brent crude oil traded on the Intercontinental Exchange (ICE).
(i) RBOB refers to reformulated blendstock for oxygenate blending traded on the NYMEX.
Note: June prices include data through market close on June 24, 2014.
Source: U.S. Energy Information Administration.

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Footnotes
1The term "petroleum and other liquids" encompasses petroleum and petroleum products and close substitutes, including crude oil, lease condensate, natural gas liquids, biofuels, coal-to-liquids, gas-to-liquids, and refinery processing gain.
2The growth rates referenced in this report may not exactly match corresponding values in tables as a result of independent rounding.