U.S. Energy Information Administration - EIA - Independent Statistics and Analysis
Short-Term Energy Outlook
Global Petroleum and Other Liquids
Global petroleum and other liquids production continues to outpace consumption, leading to inventory builds throughout the forecast period. Global oil inventory builds in the third quarter of 2015 averaged 1.6 million b/d, down from 2.0 million b/d in the second quarter, which had the highest level of inventory builds since the fourth quarter of 2008. The pace of inventory builds is expected to slow in the fourth quarter to roughly 1.2 million b/d. In 2016, inventory builds are expected to slow further to an average of 0.4 million b/d as global liquids output is expected to be unchanged from 2015. The 0.4 million b/d reduction in projected 2016 inventory builds from last month's STEO mostly reflects lower forecast oil production in Canada and the United States.
Global Petroleum and Other Liquids Consumption
EIA estimates global consumption of petroleum and other liquids grew by 1.2 million b/d in 2014, averaging 92.4 million b/d for the year. EIA expects global consumption of petroleum and other liquids to grow by 1.4 million b/d in both 2015 and 2016. Projected real gross domestic product (GDP) for the world weighted by oil consumption, which increased by 2.7% in 2014, is expected to rise by 2.3% in 2015 and by 2.7% in 2016.
Consumption of petroleum and other liquids in countries outside the Organization for Economic Cooperation and Development (OECD) increased by 1.4 million b/d in 2014 and is projected to grow by 0.8 million b/d in 2015 and by 1.2 million b/d in 2016. China continues to be the main driver of non-OECD oil consumption growth, despite the slowdown in the country's economic growth that began in the second half of 2014. China's consumption growth is expected to average 0.3 million b/d in 2015 and in 2016, below the 0.4 million b/d growth in 2014. Iran is expected to experience an uptick in economic activity and petroleum consumption in 2016, assuming implementation of the Joint Comprehensive Plan of Action (JCPOA) between Iran and the five permanent members of the United Nations Security Council plus Germany (P5+1) announced on July 14.
After falling by 0.3 million b/d in 2014, OECD petroleum and other liquids consumption is expected to rise by 0.6 million b/d in 2015 and by 0.2 million b/d in 2016, reaching an average of 46.5 million b/d, the highest annual average level of OECD consumption since 2010. U.S. consumption is expected to grow by an average of 0.3 million b/d in 2015 and by 0.1 million b/d in 2016. Economic conditions improved in several OECD countries in Europe and Asia as they emerged from recessions, contributing to 2015 oil demand growth. Also, colder-than-normal weather early in 2015 across OECD Europe contributed to a projected 0.2 million b/d increase in 2015 oil consumption. Consumption in OECD Europe is forecast to remain relatively unchanged in 2016. Consumption in Turkey in 2015 was revised upward to account for higher-than-forecast use of jet fuel, particularly in the third quarter of the year. In the same quarter, Japan saw an uptick in petroleum consumption for electricity generation, which made up for lower hydropower electricity generation. However, consumption in Japan is forecast to decline by an average of 0.1 million b/d in 2015 and 2016.
Non-OPEC Petroleum and Other Liquids Supply
EIA estimates that petroleum and other liquids production in countries outside of the Organization of the Petroleum Exporting Countries (OPEC) grew by 2.5 million b/d in 2014, which mainly reflects production growth in the United States. EIA expects non-OPEC production to grow by 1.1 million b/d in 2015, and then decline by 0.3 million b/d in 2016, which would be the first annual decline in non-OPEC production since 2008. In last month's STEO, non-OPEC production was forecast to increase by 0.1 million b/d. The shift in expectation from non-OPEC production growth to declines in 2016 is mostly because of lower expected growth in Canada and larger expected declines in U.S. onshore production.
Non-OPEC production growth in 2015 is largely attributable to investments committed to projects before the oil price decline that began in mid-2014. For example, the decisions to invest in the Golden Eagle, Peregrine, and Kinnoull fields in the United Kingdom's sector of the North Sea, which started producing at the end of 2014 and the beginning of 2015, were made in the second half of 2011. Redirection of investment away from exploration towards currently producing fields has also helped maintain or grow production levels in other non-OPEC countries. This strategy has helped maintain production levels in the short term, but likely will result in lower future production in areas that depend on continued exploration successes for output growth.
Production growth in Canada is expected to average 0.1 million b/d in both 2015 and 2016, levels that are 0.1 million b/d and 0.2 million b/d, respectively, lower than in last month's forecast. The reduction in forecast growth in Canada reflects persistently low oil prices resulting in announced delays or cancellations of projects previously scheduled to come online during the forecast period, including Shell's October announcement canceling the 80,000 b/d Camron Creek project. However, some oil sands projects continue as planned, including the Imperial Oil and Cenovus oil sands projects scheduled to come online by the end of 2016.
Unplanned supply disruptions among non-OPEC producers averaged almost 0.7 million b/d in October, a decrease of 0.2 million b/d from the previous month. The Syncrude oil sands development in northern Alberta returned to operation after an August fire damaged processing unit equipment. In early November, in what appears to be a widespread industrial action, Brazilian oil workers began striking, which caused more than 0.3 million b/d to be shut in during the first week of the month. At the time of writing, Petrobras and a number of workers unions involved in the industrial action have failed to come to an agreement to end the strike.
OPEC Petroleum and Other Liquids Supply
EIA estimates that OPEC crude oil production averaged 30.1 million b/d in 2014, relatively unchanged from the previous year. Crude oil production declines in Libya, Angola, Algeria, and Kuwait offset production growth in Iraq and Iran. EIA forecasts OPEC crude oil production to increase by 0.9 million b/d in 2015, led by production increases in Iraq. Forecast OPEC crude oil production increases by 0.2 million b/d in 2016, with Iran forecast to increase production once international sanctions targeting its oil sector are suspended. Under the JCPOA between the P5+1 and Iran that was announced on July 14, sanctions relief is contingent on verification by the International Atomic Energy Agency (IAEA) that Iran has complied with key nuclear-related steps.
While much uncertainty remains as to the timing of sanctions relief, EIA assumes its implementation occurs in the second quarter of 2016, clearing the way to ease the sanctions at that time. As a result, EIA forecasts Iranian crude oil supplies will increase by more than 0.2 million b/d on average in 2016, reaching roughly 3.3 million b/d by the end of the year.
Some OPEC member countries will see production declines in the near term. Saudi Arabia's production is expected to respond to lower direct crude burn for electric power generation as seasonal power demand abates. Also, there is considerable uncertainty regarding Iraq's ability to sustain its higher production and export levels, particularly in light of budgetary constraints that have prompted the Iraqi government to request international oil companies operating in the south to reduce spending plans next year.
OPEC noncrude liquids production, which averaged 6.3 million b/d in 2014, is expected to increase by 0.2 million b/d in 2015 and by 0.3 million b/d in 2016, led by production increases in Iran, Qatar, and Kuwait.
In October, unplanned crude oil supply disruptions among OPEC producers averaged 2.9 million b/d, more than 0.2 million b/d above the previous month. In Iraq, bad weather in the Basra Gulf caused southern exports to decrease by 0.3 million b/d. The disruption in Iraq was partially offset by a less than 0.1 million b/d increase to Libya's production. In Libya, the brief reopening of the Zueitina export terminal allowed some production to restart in October, but the port was shut down again in the beginning of November. Kuwait and Saudi Arabia continue to have a total of 0.5 million b/d disrupted at the Wafra and Khafji fields in the Neutral Zone that straddles the two countries.
EIA's estimates of unplanned production outages are calculated as the difference between estimated effective production capacity (the level of supply that could be available within one year) and estimated production. EIA lowered its historical estimates of unplanned OPEC crude oil supply disruptions in 2015, as Libya's crude oil production capacity was lowered by 150,000 b/d to 1.4 million b/d. The change reflects the extensive damage at oil fields in the Sirte Basin caused by militant groups.
EIA expects OPEC surplus crude oil production capacity to average 1.5 million b/d in 2015 and 2.0 million b/d in 2016, after averaging 2.0 million b/d in 2014. EIA estimates that Iran's crude oil production capacity is 3.6 million b/d, which is 0.8 million b/d higher than its current estimated production level. EIA currently categorizes that 0.8 million b/d as a disruption because Iran's production is restricted by sanctions that affect the country's ability to sell its oil. However, if sanctions are lifted next year, any difference between its crude oil production capacity and its crude oil production level would henceforth be considered surplus capacity.
Surplus capacity is typically an indicator of market conditions, and surplus capacity below 2.5 million b/d indicates a relatively tight oil market, but the high current and forecast levels of global inventory builds make the projected low surplus capacity level in 2015 less significant.
OECD Petroleum Inventories
EIA estimates that OECD commercial crude oil and other liquids inventories totaled 2.70 billion barrels at the end of 2014, equivalent to roughly 59 days of consumption. Forecast OECD inventories rise to 2.95 billion barrels at the end of 2015 and then to 2.98 billion barrels at the end of 2016.
Crude Oil Prices
Brent crude oil spot prices increased by $1/b in October to a monthly average of $48/b. Although oil price volatility declined during October, it remained elevated compared with 2013-14 levels, as Brent spot prices changed by at least 3% on four different trading days during the month.
Continuing increases in global liquids inventories have put significant downward pressure on prices in 2015. Inventories rose by an estimated 1.8 million b/d through the first three quarters of 2015, compared with an average build of 0.5 million b/d over the same period in 2014. Global liquid fuels inventory builds are expected to slow to an average 1.2 million b/d in the fourth quarter of 2015, and then slow further to an average of 0.4 million b/d in 2016.
The monthly average WTI crude oil spot price averaged $46/b in October. October WTI prices were up slightly from the average in September, as end-of-October crude oil inventories at the Cushing, Oklahoma, storage hub were relatively unchanged from levels a month earlier despite heavy refinery maintenance that reduced crude oil flows into Midwest refineries.
EIA forecasts that Brent crude oil prices will average $54/b in 2015 and $56/b in 2016. The 2015 forecast price is unchanged from last month's STEO, and the 2016 forecast price is $2/b lower. Forecast WTI crude oil prices average $4/b lower than the Brent price in 2015 and $5/b lower in 2016.
EIA's crude oil price forecast remains subject to significant uncertainties as the oil market moves toward balance. During this period of price discovery, oil prices could continue to experience periods of heightened volatility. The oil market faces many uncertainties heading into 2016, including the pace and volume at which Iranian oil reenters the market, the strength of oil consumption growth, and the responsiveness of non-OPEC production to low oil prices.
The current values of futures and options contracts continue to suggest high uncertainty in the price outlook (Market Prices and Uncertainty Report). WTI futures contracts for February 2016 delivery, traded during the five-day period ending November 5, averaged $48/b, while implied volatility averaged 38%. These levels established the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in February 2016 at $35/b and $66/b, respectively. The 95% confidence interval for market expectations widens over time, with lower and upper limits of $28/b and $95/b for prices in December 2016. Last year at this time, WTI for February 2015 delivery averaged $79/b, and implied volatility averaged 28%. The corresponding lower and upper limits of the 95% confidence interval were $63/b and $99/b.
|Global Petroleum and Other Liquids|
|2013||2014||2015 projected||2016 projected|
a Weighted by oil consumption.
b Foreign currency per U.S. dollar.
|Supply & Consumption||(million barrels per day)|
|OPEC Crude Oil Portion||30.12||30.08||30.96||31.19|
|Total World Production||90.86||93.27||95.48||95.66|
|OECD Commercial Inventory (end-of-year)||2550||2698||2952||2984|
|Total OPEC surplus crude oil production capacity||2.13||2.02||1.49||2.01|
|Total World Consumption||91.28||92.45||93.86||95.26|
|Primary Assumptions||(percent change from prior year)|
|World Real Gross Domestic Producta||2.6||2.7||2.3||2.7|
|Real U.S. Dollar Exchange Rateb||3.8||3.6||11.1||4.1|
Interactive Data Viewers
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|2015 Summer Fuels Outlook Slideshow||Apr-2015|
|2014 Summer Fuels Outlook Slideshow||Apr-2014|
|Uncertainties in the Short-Term Global Petroleum and Other Liquids Supply Forecast||Feb-2014|
|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|
|Energy Price Volatility and Forecast Uncertainty||Oct-2009|