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Short-Term Energy Outlook

Release Date: September 7, 2016  |  Next Release Date: October 12, 2016  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Global Petroleum and Other Liquid Fuels

EIA estimates that global petroleum and other liquid fuels inventory builds averaged 1.8 million b/d in 2015. The pace of inventory builds is expected to slow to an average of 0.8 million b/d in 2016. Inventory builds are expected to continue into early 2017, and then consistent inventory draws are forecast to begin in June 2017.

Global Petroleum and Other Liquid Fuels Consumption

Global consumption of petroleum and other liquid fuels is estimated to have grown by 1.4 million b/d in 2015. EIA expects global consumption to increase by 1.5 million b/d in 2016 and by 1.4 million b/d in 2017, mostly driven by growth in countries outside of the Organization for Economic Cooperation and Development (OECD). Non-OECD consumption growth was 0.9 million b/d in 2015, and it is expected to be 1.2 million b/d in 2016 and 1.3 million b/d in 2017.

India and China are expected to be the largest contributors to non-OECD petroleum consumption growth, with each country's consumption forecast to increase between 0.3 million and 0.4 million b/d annually in both 2016 and 2017. In India, consumption growth is mainly a result of increased use of transportation fuels and of naphtha for new petrochemical projects. China's growth in consumption of petroleum and other liquid fuels is driven by increased use of gasoline, jet fuel, and hydrocarbon gas liquids (HGL), which more than offsets decreases in diesel consumption. Last year's significant rise in the use of HGL in China will continue through the forecast period, as new propane dehydrogenation (PDH) plants increase the use of propane.

OECD petroleum and other liquid fuels consumption rose by 0.5 million b/d in 2015. OECD consumption is expected to increase by 0.2 million b/d in 2016 and by 0.1 million b/d in 2017.

Figure 6: World Liquid Fuels Consumption Growth

Non-OPEC Petroleum and Other Liquid Fuels Supply

EIA estimates that petroleum and other liquid fuels production in countries outside the Organization of the Petroleum Exporting Countries (OPEC) grew by 1.5 million b/d in 2015, with more than half of the growth occurring in North America. However, EIA expects non-OPEC production to decline by 0.4 million b/d in 2016 and by 0.2 million b/d in 2017.

Changes in non-OPEC production are significantly affected by changes in U.S. tight oil production, which has high decline rates for production and relatively short investment horizons, making it among the most price-sensitive oil-producing areas. Forecast total U.S. production of liquid fuels declines by 290,000 b/d in 2016 and remains flat in 2017, as declining onshore crude oil production is partially offset by expected growth in HGL production, Gulf of Mexico crude oil production, and liquid biofuels production. Outside the United States, non-OPEC production declines by 120,000 b/d in 2016 and by 220,000 b/d in 2017.

Among non-OPEC producers outside the United States, the largest decline in 2016 is forecast to be in China. EIA expects China's output to fall by 190,000 b/d in 2016 and by an additional 70,000 b/d in 2017 because of continued investment cuts and fewer new offshore developments. In 2017, the largest non-OPEC declines are in the North Sea and in Russia, which are forecast to decline by 210,000 b/d and 220,000 b/d, respectively, following forecast production growth in both areas this year.

Canadian production is expected to grow in both 2016 and 2017, although annual growth in 2016 will be only 30,000 b/d because of production lost to wildfires in Alberta that resulted in oil sands outages in May and June, and to a lesser extent in July. However, Canadian production is expected to increase by 250,000 b/d in 2017.

Non-OPEC unplanned supply outages in August were about 0.4 million b/d, a decrease of about 0.1 million b/d from the July level.

OPEC Petroleum and Other Liquid Fuels Supply

OPEC crude oil production averaged 31.8 million b/d in 2015, an increase of 0.8 million b/d from 2014, led by rising production in Iraq and Saudi Arabia. Forecast OPEC crude oil production rises by 0.7 million b/d in 2016, with Iran accounting for most of the increase, and by an additional 0.5 million b/d in 2017. The forecast does not assume a collaborative production cut among OPEC members and other producers, as major OPEC producers are expected to continue their strategy of maintaining market share.

OPEC noncrude liquids production averaged 6.6 million b/d in 2015 and is forecast to increase by 0.2 million b/d in 2016 and by 0.3 million b/d in 2017, led by increases in Iran and Qatar.

OPEC unplanned crude oil supply disruptions averaged 2.4 million b/d in August, 0.1 million b/d higher than the July level. Nigeria's outages decreased slightly in August, but they remain at roughly 0.7 million b/d, as major crude oil streams (Bonny Light, Forcados, Brass River, and Qua Iboe) all continue to experience production disruptions. In Libya, export volumes at the Hariga terminal were halted for a short time in July, which led to an outage at the Sarir field, increasing Libya's disruptions by 0.1 million b/d. Although the Hariga terminal reopened at the end of July, the outage at the Sarir field persisted into August, leaving Libya's total disrupted volumes at more than 1.0 million b/d.

OPEC surplus crude oil production capacity, which averaged 1.6 million b/d in 2015, is expected to be 1.5 million b/d in 2016 and 1.3 million b/d in 2017. Surplus capacity is typically an indicator of market conditions, and surplus capacity below 2.5 million b/d indicates a relatively tight oil market. However, high current and forecast levels of global oil inventories make the forecast low surplus capacity less significant.

OECD Petroleum Inventories

EIA estimates that OECD commercial crude oil and other liquid fuels inventories were 3.00 billion barrels at the end of 2015, equivalent to roughly 66 days of consumption. Forecast OECD inventories rise to 3.09 billion barrels at the end of 2016 and then fall to 3.06 billion barrels at the end of 2017.

Crude Oil Prices

The monthly average spot price of Brent crude oil increased by $1/b in August to $46/b. Despite continued increases in global oil inventories and U.S. oil rig counts, market reactions to a potential OPEC deal to freeze production at current levels put upward pressure on prices in August.

EIA expects global oil inventory builds to continue in the near future, averaging 0.6 million b/d in the second half of 2016, but the builds are forecast to remain well below the levels that occurred in 2015 and early 2016. Although the pace of inventory builds is slowing, continuing builds and high inventory levels will likely contribute to Brent prices maintaining the recent $40/b to $50/b trading range during the next two quarters. EIA forecasts Brent prices to average $45/b during the fourth quarter of 2016 and first quarter of 2017, acknowledging that global economic developments and geopolitical events in the coming months have the potential to push oil prices near the top or bottom of the $40/b to $50/b range.

EIA expects global oil inventory draws to begin in mid-2017. The expectation of inventory draws contributes to rising prices in the second quarter of 2017, with price increases continuing later in 2017. Brent prices are forecast to average $52/b in 2017. Forecast Brent prices average $58/b in the fourth quarter of 2017, reflecting the potential for more significant inventory draws beyond the forecast period.

Average West Texas Intermediate (WTI) crude oil prices are forecast to be $1/b lower than Brent prices in 2016 and 2017. The slight price discount of WTI to Brent in the forecast is based on the assumption of competition between the two crudes in the U.S. Gulf Coast refinery market.

The current values of futures and options contracts highlight the heightened volatility and high uncertainty in the oil price outlook (Market Prices and Uncertainty Report). WTI futures contracts for December 2016 delivery that were traded during the five-day period ending September 1 averaged $47/b, and implied volatility averaged 37%. These levels established the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in December 2016 at $34/b and $65/b, respectively. The 95% confidence interval for market expectations widens over time, with lower and upper limits of $25/b and $104/b for prices in December 2017. At this time in 2015, WTI for December 2015 delivery averaged $48/b, and implied volatility averaged 47%, with the corresponding lower and upper limits of the 95% confidence interval at $32/b and $73/b

Global Petroleum and Other Liquids
  2014 2015 2016 2017
a Weighted by oil consumption.
b Foreign currency per U.S. dollar.
Supply & Consumption (million barrels per day)
Non-OPEC Production 55.91 57.40 56.98 56.76
OPEC Production 37.46 38.32 39.22 40.02
OPEC Crude Oil Portion 30.99 31.76 32.41 32.95
Total World Production 93.37 95.72 96.20 96.79
OECD Commercial Inventory (end-of-year) 2721 2997 3090 3062
Total OPEC surplus crude oil production capacity 2.07 1.59 1.49 1.35
OECD Consumption 45.77 46.24 46.48 46.60
Non-OECD Consumption 46.69 47.64 48.88 50.18
Total World Consumption 92.46 93.88 95.36 96.78
Primary Assumptions (percent change from prior year)
World Real Gross Domestic Producta 2.8 2.5 2.1 2.7
Real U.S. Dollar Exchange Rateb 3.8 10.9 5.9 2.5

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