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Short-Term Energy Outlook

Release Date: January 15, 2019  |  Next Release Date: February 12, 2019  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Global liquid fuels

EIA estimates that global petroleum and other liquid fuels inventories increased by 1.0 million barrels per day (b/d) in the fourth quarter of 2018, contributing to downward pressure on oil prices. EIA forecasts global liquid fuels balances will continue to build in the first half of 2019 at a pace of 0.3 million b/d, before oil markets become more balanced during the second half of 2019. EIA expects inventory builds to average 0.2 million b/d in 2019 and 0.4 million b/d in 2020. The higher builds in 2020 occur as U.S. production continues to grow and the 2019 forecast declines in Organization of the Petroleum Exporting Countries (OPEC) moderate.

World liquid fuels production and consumption balance

EIA forecasts global liquid fuels production to average 101.8 million b/d in 2019 and consumption to average 101.5 million b/d, which contributes to modest inventory builds. Production growth in 2019 is led by non-OPEC countries, particularly the United States and Brazil. EIA expects non-OPEC producers will increase oil supply by 2.4 million b/d in 2019, which will offset forecast supply declines of 1.0 million b/d from OPEC members. In 2020, the main drivers of oil production growth are expected to be the United States, Canada, Brazil, and Russia, while OPEC crude oil production is expected to remain flat.

Marine distillate use in countries outside of the Organization for Economic Cooperation and Development (OECD) will likely increase through 2020, when more stringent International Maritime Organization (IMO) specifications on sulfur levels in bunkering fuel will come into effect. Likewise, the use of high-sulfur residual fuel oil use currently used for bunkering fuel will likely decline. Also, EIA does not expect a significant switch to liquefied natural gas in 2020 as a result of the regulation. As a result, EIA does not anticipate the regulations will have a significant effect on total global liquid fuels consumption in 2020. The switch from highly energy-dense residual fuel to marine distillate will likely result in an increase in total liquid fuels consumption of no more than 0.1 million b/d, as the use of less energy-dense fuel will require some increase in volume to serve an equivalent level of shipping traffic.

Brent crude oil spot prices averaged $71 per barrel (b) in 2018, an increase of $17/b from 2017 levels. Daily Brent spot prices last year reached a peak of $86/b in October 2018, which was the highest level since October 2014, before falling to nearly $50/b by the end of the year. The price decrease in the latter part of 2018 reflected global oil inventory builds and record levels of oil production from the world’s three largest producers—the United States, Russia, and Saudi Arabia—along with uncertainties about global demand growth for the coming year. EIA forecasts that Brent spot prices will gradually increase from an average of $57/b in December 2018 to $65/b by December 2020. Forecast Brent spot prices average $61/b in 2019 and $65/b in 2020.

Global Petroleum and Other Liquid Fuels Consumption.

Global consumption of petroleum and other liquid fuels grew by 1.4 million b/d in 2018, reaching an average of 100.0 million b/d for the year. EIA expects consumption growth to average slightly above 1.5 million b/d in 2019 and in 2020. The relatively stable consumption growth reflects small forecast declines in the rate of global gross domestic product (GDP) growth from 2018, which EIA expects will be generally offset by lower oil prices in 2019 and 2020 compared with 2018, along with increases in petrochemical related demand and IMO-related volume gain.

World liquid fuels consumption growth

Non-OECD countries continue to drive demand growth in the forecast. Non-OECD liquid fuels consumption growth accounts for 1.1 million b/d of the global growth in 2019 and 1.2 million b/d in 2020, with China and India accounting for most of this growth. EIA forecasts that China’s consumption will increase by 0.5 million b/d in 2019 and in 2020. EIA does not expect growth in Chinese oil consumption to slow by as much as slowing GDP growth because of the addition of a number of petrochemical plants, which will add an estimated 75,000 b/d of consumption in 2019 and an additional 70,000 b/d in 2020. EIA’s forecast liquid fuels consumption in India grows by more than 0.2 million b/d in both 2019 and 2020, driven by rising use of gasoline, jet fuel, and hydrocarbon gas liquids.

World liquid fuels consumption

OECD petroleum and other liquid fuels consumption is forecast by EIA to grow by 0.4 million b/d in 2019 and by 0.3 million b/d in 2020. The United States is the leading contributor to this forecast growth, with consumption rising by 0.3 million b/d in 2019 and by 0.2 million b/d in 2020. EIA forecasts that Europe’s liquid fuels consumption will grow by 90,000 b/d in 2019 and in 2020. Japan is expected to see liquid fuels consumption decline by an average of 80,000 b/d in both years.

Non‐OPEC Petroleum and Other Liquid Fuels Supply.

EIA estimates that non-OPEC petroleum and other liquid fuels supply increased by 2.5 million b/d in 2018. Production growth of 2.2 million b/d in the United States accounted for most of the 2018 supply growth, with Canada, Russia, Kazakhstan, and Brazil collectively adding an additional 0.6 million b/d. EIA expects non-OPEC petroleum and other liquid fuels production to rise by 2.4 million b/d in 2019 and by 1.9 million b/d in 2020. Forecast growth in the United States contributes 1.7 million b/d and 1.2 million b/d, respectively, in each year, with Brazil providing another 0.3 million b/d in 2019 and 0.2 million b/d in 2020.

World liquid fuels production and consumption balance

EIA expects Canada’s total liquid fuels production to decrease by 0.1 million b/d in 2019 as a result of government-mandated production cuts in Alberta. In 2020, EIA expects Canadian production to increase by 0.2 million b/d after the cuts end in late 2019. Oil sands projects, including Horizon, Fort Hills, and Hebron, continue to drive production growth in the forecast. EIA does not expect any additional production from new upstream projects to come online during the forecast period, only expansions of existing projects.

EIA expects Brazil’s petroleum and other liquid fuels production to grow by more than 0.3 million b/d in 2019 and by 0.2 million b/d in 2020. The main driver of growth in 2018 was the addition of four floating, production, storage, and offloading vessels (FPSOs). Similarly, the addition of at least five more FPSOs will continue to drive growth through 2020. Continued emphasis on the development of pre-salt resources and implementation of previous reforms, including those to local content rules, could result in higher production growth during the forecast period. EIA believes the Santos Basin, particularly the Lula field, will produce enough crude oil in the next two years to offset declines in Brazil’s more mature onshore and offshore areas.

EIA expects that during the first several months of 2019, Russia will gradually reduce production from record high levels reached during the fourth quarter of 2018. The expected reductions are a result of the agreement that Russia and other non-OPEC countries reached with OPEC members in December 2018. EIA then expects production growth in Russia to resume in the second half of 2019 and continue into 2020.

Another source of growth for non-OPEC petroleum and other liquid fuels production in the forecast period is Kazakhstan, where EIA forecasts production to ramp up in 2019 to peak production levels at the Kashagan field. Norway’s production is expected to be mostly flat in 2019 and then increase by 0.1 million b/d in 2020 when the Martin Linge field and a number of smaller fields are scheduled to come online. Phase 1 of the Johan Sverdrup field, scheduled to come online by the end of 2019, drives most of the production growth in 2020. At its peak, Phase 1 will produce 0.4 million b/d. Australia, Qatar, and the United Kingdom are also expected to increase liquid fuels production in the forecast. EIA forecasts the largest declines among non-OPEC producers to be in Mexico, Indonesia, and Egypt.

OPEC Petroleum and Other Liquid Fuels Supply.

At OPEC’s meeting in June 2018, the group noted it had exceeded its previous targets for production cuts set in late 2016 and asked its members to keep reductions at targeted levels. As a result, OPEC crude oil production increased during the second half of 2018, contributing to rising global oil inventories and falling crude oil prices. In light of these market conditions, on December 7, 2018, OPEC producers and non-OPEC participants (OPEC+) announced a 1.2 million b/d cut relative to October 2018 production levels that would begin in January 2019.

EIA’s production forecast does not assume full compliance with the December 2018 cuts, although EIA expects the level of production cuts will contribute to the global markets returning to more balanced conditions during the second half of 2019. EIA expects that OPEC crude oil output will decrease by 1.0 million b/d on average in 2019 and will remain flat in 2020.

Qatar left OPEC effective on January 1, 2019. Starting with this edition of STEO, Qatar’s crude oil and other liquid fuels production will be included in the non-OPEC data for both history and forecast. In 2018, EIA estimates that Qatar’s crude oil production averaged about 610,000 b/d, with an additional 1.3 million b/d in non-crude liquids production.

Iraq is one of the main sources of production growth among OPEC members in the extended forecast period. EIA expects increasing production capacity at the northern Kirkuk fields and a resumption of Baghdad-administered exports through the Iraqi-Kurdistan pipeline will help alleviate export capacity issues and contribute to production growth. In addition, returning capacity at domestic refineries will increase domestic crude oil demand.

After the May 2018 announcement of the U.S. withdrawal from the Joint Comprehensive Plan of Action (JCPOA) and reinstatement of sanctions on Iran in November 2018, EIA estimates that Iranian crude oil and condensate production decreased significantly. By December 2018, Iranian crude oil production had declined by more than 1.0 million b/d from first quarter of 2018. Domestic Iranian consumption grew concurrently, as refineries increased output rates and power plants switched from natural gas to crude oil for electric power generation. For this reason, Iran's exports have fallen at a faster rate than production.

EIA assumes that U.S. sanctions on Iranian oil exports will remain in place through the end of the forecast period. Furthermore, the current forecast reflects an expectation that reduction exemption waivers issued to eight countries to continue buying Iranian oil will not be extended past May 2019.

Following reinstated sanctions on Iran and decreasing production in Venezuela, Saudi Arabia significantly increased production in the latter half of 2018, producing almost 0.8 million b/d more in November 2018 than in January 2018. On average, Saudi Arabia produced 10.4 million b/d in 2018, and EIA forecasts average Saudi production to fall below that level in 2019 and in 2020 as it complies with the latest OPEC+ production cut agreement.

As of December 2018, Venezuela’s crude oil production stood at about 1.2 million b/d, near its lowest level since early 2003, when volumes fell as a result of a general strike. EIA expects Venezuela’s production to continue to fall through the forecast period—albeit at a slower overall rate of decline—while the financial situation of the state-owned Petróleos de Venezuela (PdVSA) remains extremely precarious. Venezuela, which relies heavily on oil revenues, has seen its cash income severely constricted because only about half of its crude oil exports generate cash revenues. The rest is used for in-kind loan payments, which become less valuable with lower global oil prices. Venezuela’s oil revenue is also reduced by ongoing payments to ConocoPhillips following an arbitration agreement about its seized assets and to holders of PdVSA’s 2020 bonds.

In Africa, EIA expects production to increase in Angola and Nigeria through 2020. Angola’s Kaombo field began production in 2018, with the second phase set to begin production in early 2019, and the Vandumbu field also came online in late 2018 ahead of schedule. Nigeria is expected to begin production at its offshore Egina project in early 2019. Libya saw production gains in 2018, albeit at marginal levels, as a result of production re-starts and development of new or previously shut-in wells. Although Libya’s 2018 production level was the highest since 2012, supply disruptions will remain a significant risk during the forecast unless the security situation in the country improves.

OPEC non-crude oil liquids production averaged 5.3 million b/d in 2018 and EIA forecasts that it will remain roughly flat in 2019, and then decrease by 0.2 million b/d in 2020. The decrease in crude oil liquids next year is the result of lower expected condensate output in Iran.

OPEC unplanned crude oil supply disruptions averaged 2.2 million b/d in December 2018, an increase of 0.3 million b/d from November. The increase in outages mainly reflects new supply disruptions in Libya. In mid-December, Libya’s National Oil Corporation issued a force majeure at El-Sharara after armed local militia attacked the oil field; the field remains occupied by local militia. Crude oil production in Nigeria has also been affected by issues related to its oil infrastructure. In mid-2018, both the Nembe Creek Trunk Line and the Trans-Forcados pipeline were shut down to repair leaks to its pipelines, which took about three months to complete.

Estimated unplanned crude oil production among OPEC and non-OPEC producers

EIA expects that OPEC surplus crude oil production capacity, which averaged 1.5 million b/d in 2018, will increase to 1.9 million b/d in 2019 and to 2.3 million b/d in 2020. This estimate does not include additional capacity that may be available in Iran but is offline because of U.S. sanctions on Iranian oil sales.

OPEC surplus crude oil production capacity

OECD Petroleum Inventories.

EIA estimates that OECD commercial crude oil and other liquid fuels inventories were 2.9 billion barrels at the end of 2018, equivalent to about 61 days of consumption. EIA expects OECD inventories to rise to just under 3.0 billion barrels at the end of 2019 and then rise to more than 3.0 billion barrels at the end of 2020.

OECD commercial stocks of crude oil and other liquids (days of supply)

Crude Oil Prices.

The spot price of Brent crude oil averaged $57/b in December, down from an average of $81/b in October 2018, which was the highest level since October 2014. The price decline in late 2018 largely reflected rising oil inventories as a result of record levels of crude oil production from the United States, Russia, and Saudi Arabia. Prices also fell as a result of uncertainties about global economic indicators and future oil demand growth.

Although OPEC+ producers announced in early December plans to cut production starting in January 2019, Brent crude oil prices continued to fall after the announcement. The price declines possibly reflected market expectations that announced production decreases would not be enough to offset increasing production levels in North America, along with the potential for weakening global oil demand growth, which could lead to continued growth in global oil inventory levels.

EIA estimates that global petroleum and other liquid fuels inventories rose by an average of 0.4 million b/d in 2018 and by an estimated 1.0 million b/d in the fourth quarter of 2018. EIA expects strong growth in U.S. and other non-OPEC liquid fuels production will contribute to global oil inventory growth of 0.2 million b/d in 2019 and 0.4 million b/d in 2020. However, EIA expects some of these inventories to be unavailable to the market because they will be the result of Iran increasing floating storage of crude oil that it cannot sell as a result of U.S. sanctions.

Given the expectation of relatively balanced markets in 2019 and 2020, with modest inventory builds, EIA forecasts Brent crude oil prices will remain lower than levels experienced during most of 2018, averaging $61/b in 2019 and $65/b in 2020. Although prices are forecast to remain lower than those experienced during most of 2018, some upward price movements from December 2018 price levels are expected to emerge in early 2019 from the need for global oil inventories to rise slightly to keep pace with demand growth and maintain five-year average levels of demand cover. Additional upward price moves are forecast in late 2019 and early 2020 because of an increase in refinery demand for light-sweet crude oil as a result of IMO regulations.

Daily and monthly average crude oil prices could vary significantly from annual average forecasts because global economic developments and geopolitical events in the coming months have the potential to push oil prices higher or lower than the current STEO price forecast. Uncertainty remains regarding how much oil the U.S. sanctions on Iran will take off the market following the expiration of waivers in the first half of 2019. In addition, questions remain regarding the duration of, and adherence to, the current OPEC+ production cuts. Developments regarding the rate of economic growth and its effect on global oil demand growth further contribute to price uncertainty. Also, although EIA expects crude oil price impacts from IMO regulations starting in 2020 to be limited, there remain many unknowns about how the global refining and shipping industries will respond, and actual outcomes of these decisions will affect crude oil prices. Finally, the U.S. tight oil sector continues to be dynamic, and quickly evolving trends in this sector could affect both current crude oil prices and expectations for future prices.

After averaging more than $10/b during October 2018, the discount of West Texas Intermediate (WTI) crude oil prices to Brent fell to an average of $8/b in December. Average WTI crude oil prices are forecast to be $6/b lower than Brent prices in 2019 and $4/b lower than Brent prices in 2020. The price discount of WTI to Brent in the forecast is based on the assumption that increasing crude oil production in the Permian Basin and current constraints on the capacity to transport crude oil from production areas in West Texas and from Cushing, Oklahoma, to refineries and export terminals along the U.S. Gulf Coast will persist until mid-2019. At that point, EIA expects that new takeaway capacity will come online from West Texas to the Gulf Coast that will reduce current distribution bottlenecks throughout Texas and Oklahoma.

The current values of futures and options contracts suggest significant uncertainty in the oil price outlook. WTI futures contracts for April 2019 delivery that were traded during the five-day period ending January 10 averaged $51/b, and implied volatility averaged 44%. These levels established the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in April 2019 at $36/b and $73/b, respectively. The 95% confidence interval for market expectations widens over time, with lower and upper limits of $28/b and $101/b, respectively, for prices in December 2019.

Global Petroleum and Other Liquids
  2017201820192020
aWeighted by oil consumption.
bForeign currency per U.S. dollar.
Supply & Consumption (million barrels per day)
Non-OPEC Production 60.7163.1765.5467.44
OPEC Production 37.3337.2436.2436.05
OPEC Crude Oil Portion 32.0731.9230.8830.90
Total World Production 98.04100.41101.79103.49
OECD Commercial Inventory (end-of-year) 2,8432,8832,9513,025
Total OPEC surplus crude oil production capacity 2.031.501.912.32
OECD Consumption 47.2347.6348.0548.40
Non-OECD Consumption 51.3252.3853.4954.67
Total World Consumption 98.55100.00101.54103.07
Primary Assumptions (percent change from prior year)
World Real Gross Domestic Producta 3.23.12.92.9
Real U.S. Dollar Exchange Rateb -0.80.40.9-2.6

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Related Figures
West Texas Intermediate (WTI) crude oil price XLSX PNG
World liquid fuels production and consumption balance XLSX PNG
Estimated unplanned crude oil production outages among OPEC and non-OPEC producers XLSX PNG
World liquid fuels consumption XLSX PNG
World liquid fuels consumption growth XLSX PNG
World crude oil and liquid fuels production XLSX PNG
World liquid fuels production and consumption XLSX PNG
OPEC surplus crude oil production capacity XLSX PNG
OECD commercial stocks of crude oil and other liquids (days of supply) XLSX PNG
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