Global Crude Oil and Liquid Fuels

Global Crude Oil and Liquid Fuels Overview

EIA estimates that global liquid fuels consumption outpaced production in the first quarter of 2013, resulting in an average draw in global liquid fuel stocks of 1.2 million barrels per day (bbl/d), which is much higher than the average 0.3-million-bbl/d draw over the last 5 years but consistent with the average 1.1-million-bbl/d draw over the last 10 years. EIA expects world oil production to exceed consumption in the second quarter of 2013, resulting in an average 0.5-million-bbl/d build in global oil stocks, which is consistent with the recent decline in crude oil prices. EIA expects the world oil market to tighten somewhat in the third quarter of 2013 as world demand reaches its summer peak, and to loosen again in the last quarter of the year as world supply grows.

Global Crude Oil and Liquid Fuels Consumption

World liquid fuels consumption grew by 0.7 million bbl/d in 2012 to reach 89.0 million bbl/d. EIA expects growth will be higher over the next two years because of a moderate recovery in global economic growth so that world consumption grows by 0.9 million bbl/d in 2013 and by 1.2 million bbl/d in 2014.

Non-OECD Asia, particularly China, is the leading contributor to projected global consumption growth. EIA expects refinery crude oil inputs in China to increase in 2013 as new refining capacity continues to come on line and investment in the property market and infrastructure sectors expands. Recent indicators of weaker industrial data at the beginning of 2013 signaled slower economic growth than in prior years and a downside risk to robust oil demand growth. EIA estimates that liquid fuels consumption in China increased by 380,000 bbl/d in 2012. Projected consumption in China will increase by 450,000 bbl/d in 2013 and by 470,000 bbl/d in 2014, albeit still lower than the average annual growth of about 520,000 bbl/d from 2004 through 2012.

OECD liquid fuels consumption fell by 0.6 million bbl/d in 2012. EIA projects OECD consumption to decline by an additional 0.4 million bbl/d in 2013 and 0.2 million bbl/d in 2014, largely because of declining consumption in Europe and Japan.

Non-OPEC Supply

EIA projects non-OPEC liquid fuels production will increase by 1.1 million bbl/d in 2013 and by 1.8 million bbl/d in 2014, an upward revision in the 2014 growth rate of 0.2 million bbl/d from last month's STEO. North America accounts for most of the projected growth in non-OPEC supply over the next two years because of continued production growth from U.S. tight oil formations and Canadian oil sands. EIA expects non-OPEC supply to also grow in Central and South America by an average of 160,000 bbl/d each year over the next two years, as Brazil and Colombia bring new production on line.

Unplanned production outages in non-OPEC countries averaged 0.9 million bbl/d in April 2013, virtually unchanged from the previous month. Syria, Yemen, and South Sudan accounted for more than three-quarters of the total unplanned non-OPEC supply disruption. EIA expects supply disruptions to persist in Syria and Yemen over the forecast period. Projected production in Syria and Yemen average about 120,000 bbl/d and 140,000 bbl/d, respectively, over the next two years. EIA expects total non-OPEC outages to abate in the second half of this year due to South Sudan resuming oil production. South Sudan restarted limited oil output at an oil field in Unity State last month. Work is being done to restart production at additional fields in Unity State and the Upper Nile State, although technical challenges may cause delays or constrain production volumes.

OPEC Supply

Projected OPEC total supply falls by 0.5 million bbl/d in 2013 and then rises by 0.1 million bbl/d in 2014. Most of the decline in 2013 comes from Saudi Arabia in response to non-OPEC supply growth, while Iraq and Angola account for most of the increase in 2014.

EIA estimates that OPEC surplus capacity, which is concentrated in Saudi Arabia, averaged about 2.7 million bbl/d in the first quarter of 2013. This was higher than the 2.1-million-bbl/d average during the same period last year but lower than the average 3.8 million bbl/d from 2009 through 2011. EIA projects OPEC surplus capacity will increase to an average of 4.6 million bbl/d in the fourth quarter of 2014. These estimates do not include additional capacity that may be available in Iran but is currently off line because of the effects of U.S. and EU sanctions on Iran's oil sector.

OECD Petroleum Inventories

EIA estimates that OECD commercial oil inventories at the end of 2012 totaled 2.65 billion barrels, equivalent to 57.9 days of supply. Projected OECD oil inventories stay relatively steady in 2013, again ending the year at 2.65 billion barrels. Projected inventories increase to 2.70 billion barrels (59.0 days of supply) at the end of 2014.

Crude Oil Prices

Concerns over global economic growth, seasonal declines in international refinery runs, and increases in North Sea oil production have contributed to a drop in Brent crude oil prices from $109 per barrel on April 1 to a low of $97 per barrel on April 17. EIA projects the Brent crude oil spot price will fall from an average of $112 per barrel in 2012 to annual averages of $106 per barrel and $101 per barrel in 2013 and 2014, respectively, reflecting the increasing supply of liquid fuels from non-OPEC countries. After averaging $94 per barrel in 2012, the forecast WTI crude oil spot price averages $93 per barrel in 2013 and $92 per barrel in 2014. By 2014, several pipeline projects from the Midcontinent to the Gulf Coast refining centers are expected to come on line, reducing the cost of transporting crude oil to refiners, which is reflected in a narrowing in the price discount of WTI to Brent.

Energy price forecasts are highly uncertain (Market Prices and Uncertainty Report). WTI futures contracts for August 2013 delivery traded during the five-day period ending May 2, 2013 averaged $93.41 per barrel. Implied volatility averaged 22 percent, establishing the lower and upper limits of the 95-percent confidence interval for the market's expectations of monthly average WTI prices in August 2013 at $77 per barrel and $113 per barrel, respectively. Last year at this time, WTI for August 2012 delivery averaged $105 per barrel and implied volatility averaged 23 percent. The corresponding lower and upper limits of the 95-percent confidence interval were $86 per barrel and $130 per barrel.