Global Crude Oil and Liquid Fuels

In April 2013, estimated total liquid fuels consumption in non-OECD countries reached 44.5 million barrels per day (bbl/d), which was higher than consumption in OECD countries (44.3 million bbl/d) for the first time in history. The expected stronger seasonal increase in consumption among the developed economies in 2013 pushes OECD consumption back on top through early 2014. On an average annual basis, non-OECD use of liquid fuels is forecast to exceed OECD levels in 2014.

Global Liquid Fuels Consumption

World liquid fuels consumption grew by 0.8 million bbl/d in 2012 to reach 89.2 million bbl/d. EIA expects world consumption to grow 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. EIA estimates that liquid fuels consumption in China increased by 380,000 bbl/d in 2012. 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. Projected consumption increases by 420,000 bbl/d in 2013 and by 430,000 bbl/d in 2014, compared with 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 0.5 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 liquid fuels production by countries that are not members of the Organization of the Petroleum Exporting Countries (OPEC) will increase by 1.2 million bbl/d in 2013 and by 1.6 million bbl/d in 2014. North America accounts for much 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.

Total unplanned non-OPEC production outages averaged 1.0 million bbl/d in May 2013, up from 0.9 million bbl/d in last month's STEO. Sudan, South Sudan, Syria, and Yemen account for more than three-quarters of the disruptions. EIA expects supply disruptions to persist in Syria and Yemen over the forecast period. EIA has lowered its forecast of supply from Kazakhstan because of continued delays in the Kashagan field.

OPEC Supply

Projected OPEC total supply, which increased by 1.2 million bbl/d in 2012, falls by 0.4 million bbl/d in 2013 and by another 0.1 million bbl/d in 2014. Most of the decline in 2013 comes from Saudi Arabia in response to non-OPEC supply growth, although Saudi production increases for the next few months because of seasonal demand. Iraq and Angola account for most of the increase in 2014. At the last OPEC meeting on May 31, 2013, the organization decided to retain its production target of 30 million bbl/d through the rest of 2013.

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 first-quarter average of 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 57.7 days of supply. Projected OECD oil inventories stay relatively steady in 2013, ending the year at 2.64 billion barrels (57.3 days of supply). Projected inventories increase to 2.68 billion barrels (58.3 days of supply) at the end of 2014.

Crude Oil Prices

After declining to a 2013 year-to-date low of $97 per barrel on April 17, Brent crude oil spot prices increased to an average of $103 per barrel in May. EIA projects the Brent crude oil spot price will fall from an average of $112 per barrel in 2012 to annual averages of $105 per barrel and $100 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 September 2013 delivery traded during the five-day period ending June 6, 2013 averaged $93.75 per barrel. Implied volatility averaged 23 percent, establishing the lower and upper limits of the 95-percent confidence interval for the market's expectations of monthly average WTI prices in September 2013 at $77 per barrel and $114 per barrel, respectively. Last year at this time, WTI for September 2012 delivery averaged $85 per barrel and implied volatility averaged 35 percent. The corresponding lower and upper limits of the 95-percent confidence interval were $63 per barrel and $115 per barrel.