U.S. Energy Information Administration - EIA - Independent Statistics and Analysis
Short-Term Energy Outlook
Global Petroleum and Other Liquids
At the conclusion of its meeting in late November, OPEC announced that it would maintain its current crude oil production target of 30 million bbl/d. EIA expects that global liquid fuels supply will continue to outpace consumption, resulting in an average stock build of 0.4 million bbl/d in 2015. Stock builds are expected to be concentrated in the first half of the year, averaging 0.7 million bbl/d during this period. EIA forecasts global liquid fuels supply to average 92.8 million bbl/d in 2015, 0.2 million bbl/d lower than in last month's STEO. The 2015 global demand forecast was also revised downward by 0.2 million bbl/d to an average of 92.3 million bbl/d, based on weaker global economic growth prospects for next year.
Consistent with OPEC's announcement, Saudi Arabia has indicated its intention to maintain its export market share rather than cut production to keep prices higher. In the past, Saudi Arabia often played the role of the swing producer, temporarily cutting its production to accommodate supply growth elsewhere or weaker global demand, or increasing its output level to make up for a supply shortfall. Saudi Arabia's production is still projected to decline in 2015 compared with this year, but by a smaller amount than previously expected. EIA projects that Saudi Arabia will cut production below its current level of 9.6 million bbl/d amid high non-OPEC supply growth, but maintain output above 9.0 million bbl/d through 2015.
Global Petroleum and Other Liquids Consumption
EIA estimates that global consumption grew by 1.3 million bbl/d in 2013, averaging 90.5 million bbl/d for the year. EIA expects global consumption to grow by 1.0 million bbl/d in 2014 and 0.9 million bbl/d in 2015. Projected global oil-consumption-weighted real gross domestic product (GDP), which increased by an estimated 2.7% in 2013, is projected to grow by 2.7% and 2.9% in 2014 and 2015, respectively. Compared with last month's forecast, global consumption was revised downward by 0.2 million bbl/d in 2015, based on a 0.3% reduction to forecast global oil-consumption-weighted real GDP growth. In the short term, the income elasticity of global demand is greater than the price elasticity of global demand. Thus, the negative impact of lower forecast economic growth on demand outweighs the positive impact of lower oil prices.
Consumption outside of the Organization for Economic Cooperation and Development (OECD) is projected to grow by 1.2 million bbl/d in 2014 and 0.9 million bbl/d in 2015. China is the leading contributor to projected global consumption growth, with consumption increasing by an annual average of 0.36 million bbl/d in 2014 and 2015.
EIA expects a 0.2-million-bbl/d decline in OECD consumption in 2014. Japan and Europe are expected to account for much of the projected OECD consumption decline. EIA expects Japan's consumption, which fell by 0.16 million bbl/d in 2013, to decline by an additional 0.16 million bbl/d in 2014 and 0.14 million bbl/d in 2015. Japan is expected to use less fuel oil in the electricity sector as the country returns some nuclear power plants to service in 2015 and increases the use of natural gas and coal to generate electricity. EIA forecasts that OECD Europe's consumption, which fell by 0.15 million bbl/d in 2013, declines by an additional 0.12 million bbl/d in 2014 and 0.14 million bbl/d in 2015. U.S. consumption, which increased by 0.47 million bbl/d in 2013, is expected to remain flat in 2014 and then increase by 0.14 million bbl/d in 2015.
Non-OPEC Petroleum and Other Liquids Supply
EIA estimates that non-OPEC production grew by 1.4 million bbl/d in 2013, averaging 54.1 million bbl/d for the year. EIA expects non-OPEC production to grow by 1.9 million bbl/d in 2014 and 0.8 million bbl/d in 2015, with the United States as the leading contributor. Non-OPEC supply is forecast to increase by 1.6 million bbl/d in 2014 and 1.0 million bbl/d in 2015. EIA estimates that Eurasia's production will rise by an annual average of 0.05 million bbl/d in 2014 and decline by 0.09 million bbl/d in 2015, reflecting declines in Russia and Azerbaijan.
Unplanned supply disruptions among non-OPEC producers averaged slightly lower than 0.6 million bbl/d in November, virtually unchanged from the previous month. South Sudan, Syria, and Yemen accounted for more than 90% of total non-OPEC supply disruptions.
OPEC Petroleum and Other Liquids Supply
EIA estimates that OPEC crude oil production averaged 29.9 million bbl/d in 2013, a decline of almost 1.0 million bbl/d from the previous year, primarily reflecting increased outages in Libya, Nigeria, Iran, and Iraq, along with strong non-OPEC supply growth. EIA expects OPEC crude oil production to fall by 0.1 million bbl/d in 2014 and by 0.2 million bbl/d in 2015. Previously projected OPEC crude oil production declines were reduced based on a reassessment of Saudi Arabia's willingness to cut production.
The Iraqi government in Baghdad reached a deal on oil exports and revenue with the Kurdistan Regional Government (KRG) in early December 2014, which could facilitate increased production and exports from northern fields controlled by the KRG and by Baghdad. Notwithstanding this agreement, the threat of the Islamic State of Iraq and the Levant (ISIL) on northern production and exports still looms. As a result, Iraq is a major wildcard to the 2015 world oil production forecast. EIA projects that Iraq's production will grow by 0.2 million bbl/d next year. Actual production growth has the potential to exceed this forecast if Baghdad and KRG follow through on the deal, and if ISIL does not substantially affect production.
Unplanned crude oil supply disruptions among OPEC producers averaged 2.7 million bbl/d in November 2014, an increase of nearly 0.6 million bbl/d because of new production outages in Libya and continued outages in the Neutral Zone shared by Kuwait and Saudi Arabia. Intermittent supply outages in Libya will most likely persist as the country faces political instability and a deteriorated security environment. As a result, EIA does not expect Libya's oil production to recover to its pre-blockade level of 1.4 million bbl/d over the forecast period.
EIA expects OPEC surplus crude oil production capacity, which is concentrated in Saudi Arabia, to average 2.1 million bbl/d in 2014 and 2.5 million bbl/d in 2015. The estimates do not include additional capacity that may be available in Iran but is offline because of the effects of U.S. and European Union sanctions on Iran's ability to sell its oil.
OECD Petroleum Inventories
EIA estimates that OECD commercial oil inventories totaled 2.55 billion barrels at the end of 2013, equivalent to roughly 55 days of consumption. Projected OECD oil inventories rise to 2.64 billion barrels at the end of 2014 and 2.71 billion barrels at the end of 2015.
Crude Oil Prices
North Sea Brent crude oil spot prices averaged $79/bbl in November, down $8/bbl from the October average and the first month Brent crude oil prices have averaged below $80/bbl since September 2010. The combination of robust world crude oil supply growth and weak global demand have contributed to rising global inventories and falling crude oil prices (EIA, This Week in Petroleum, November 13, 2014). On November 27, following OPEC's decision to leave its crude oil production target unchanged, Brent crude oil spot prices fell by more than 10%, and have since fallen to $68/bbl as of December 4, the lowest daily price since May 25, 2010.
EIA expects global oil inventories to continue to build over the next year, keeping downward pressure on oil prices. The forecast Brent crude oil price averages $68/bbl in 2015, $15/bbl lower than projected in last month's STEO. Based on current market balances, EIA expects downward price pressures to be concentrated in the first half of 2015 when global inventory builds are expected to be particularly strong. EIA projects that Brent prices will reach a 2015 monthly average low of $63/bbl for each month from March through May, and then increase through the remainder of the year to average $73/bbl during the fourth quarter.
The monthly average WTI crude oil spot price fell from an average of $84/bbl in October to $76/bbl in November. Like Brent crude oil prices, WTI prices have decreased considerably, falling by more than 28% since reaching their 2014 peak at an average of $106/bbl in June. EIA now expects WTI crude oil prices to average $75/bbl in the fourth quarter of 2014 and $63/bbl in 2015, $5/bbl and $15/bbl lower than projected in last month's STEO, respectively. The discount of WTI to Brent crude oil is forecast to widen slightly from current levels, averaging $5/bbl in 2015.
However, the current values of futures and options contracts suggest high uncertainty in the price outlook (Market Prices and Uncertainty Report). WTI futures contracts for March 2015 delivery, traded during the five-day period ending December 4, averaged $67/bbl. Implied volatility averaged 32%, establishing the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in March 2015 at $51/bbl and $89/bbl, respectively. Last year at this time, WTI for March 2014 delivery averaged $96/bbl and implied volatility averaged 19%. The corresponding lower and upper limits of the 95% confidence interval were $82/bbl and $112/bbl.
The recent declines in oil price and associated increases in oil price volatility have created a particularly uncertain forecasting environment, and several factors could cause oil prices to deviate significantly from current projections. Among these is the responsiveness of supply to the lower price environment. Despite OPEC's recent decision to leave its crude oil production target at 30 million bbl/d, if crude oil prices continue to fall, Saudi Arabia and others could choose to cut production, tightening market balances. The level of crude oil production outages could also vary from forecast levels for a wide range of producers, including OPEC members Libya, Iraq, Iran, Nigeria, and Venezuela. Additionally, the price and lag time required to cause a reduction in forecast non-OPEC supply growth, particularly U.S. tight oil, is not known. The degree to which non-OPEC supply growth is affected by lower oil prices will also affect market balances and prices.
Several OPEC and non-OPEC oil producers rely heavily on oil revenues to finance their fiscal budgets. Some producers have already started adjusting their upcoming budgets to reflect the crude oil price decline. If crude oil prices continue to fall or are sustained at a lower level, then oil-dependent producers will have to make tough policy decisions. This could potentially lead to austerity programs and fuel subsidy cuts that could spark social unrest, leaving some countries vulnerable to supply disruptions if protestors target oil infrastructure. Potential new supply disruptions are a real possibility in a lower-than-expected price climate and present an uncertainty in the world oil supply forecast.
|Global Petroleum and Other Liquids|
|2012||2013||2014 projected||2015 projected|
a Weighted by oil consumption.
b Foreign currency per U.S. dollar.
|Supply & Consumption||(million barrels per day)|
|OPEC Crude Oil Portion||30.91||29.92||29.84||29.67|
|Total World Production||89.76||90.16||91.96||92.75|
|OECD Commercial Inventory (end-of-year)||2646||2551||2642||2705|
|Total OPEC surplus crude oil production capacity||2.11||2.13||2.07||2.52|
|Total World Consumption||89.14||90.48||91.44||92.32|
|Primary Assumptions||(percent change from prior year)|
|World Real Gross Domestic Producta||2.7||2.7||2.7||2.9|
|Real U.S. Dollar Exchange Rateb||3.8||3.6||3.3||4.8|
Interactive Data Viewers
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|Key drivers for EIA's short-term U.S. crude oil production outlook||Feb-2013|
|Brent Crude Oil Spot Price Forecast||Jul-2012|
|Probabilities of Possible Future Prices||Apr-2010|
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