‹ Analysis & Projections

Short-Term Energy Outlook

Release Date: January 9, 2018  |  Next Release Date: February 6, 2018  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Global Liquid Fuels

EIA estimates that global petroleum and other liquid fuels inventory draws averaged 0.4 million barrels per day (b/d) in 2017, marking the first year of global inventory draws since 2013. EIA expects global inventories to increase by 0.2 million b/d in 2018 and by 0.3 million b/d in 2019.

The Brent crude oil spot price averaged $54/b in 2017, an increase of $10/b from 2016 levels. Daily Brent spot prices ended 2017 near $67/b, which was the highest price level since December 2014. The price increase in 2017 is consistent with the global inventory draws experienced during the year. EIA expects that the modest inventory builds forecast for 2018 and 2019 will contribute to Brent crude oil prices declining from current levels to an average of $60/b in the first quarter of 2018. Brent prices are then expected to remain relatively flat near $60/b for the remainder of the forecast period. Forecast Brent spot prices average $60/b in 2018 and $61/b in 2019.

Global Petroleum and Other Liquid Fuels Consumption. Global consumption of petroleum and other liquid fuels grew by 1.4 million b/d in 2017, reaching an average of 98.4 million b/d for the year. Although the rate of consumption growth slowed in 2017 compared with 2016, EIA expects that consumption growth will average 1.7 million b/d in 2018 and almost 1.7 million b/d 2019, driven by the countries outside of the Organization for Economic Cooperation and Development (OECD). Non-OECD consumption growth would account for 1.2 million b/d and 1.3 million b/d of the global growth in 2018 and 2019, respectively. The non-OECD petroleum and other liquid fuels consumption growth is driven by a forecast of higher growth in non-OECD oil-weighted Gross Domestic Product (GDP). Growth in non-OECD oil-weighted GDP is expected to be 4.3% in 2018 and 4.4% in 2019, up from 3.9% in 2017.

EIA expects India and China to be the largest contributors to growth in non-OECD petroleum and other liquid fuels consumption in 2018 and 2019. China’s consumption is expected to increase by 0.4 million b/d in 2018, followed by a 0.3 million b/d increase in 2019. Consumption growth in China reflects expectations of increased use of gasoline, jet fuel, and, to a lesser extent, hydrocarbon gas liquids (HGL). India, which saw slower-than-expected liquid fuels consumption growth of less than 0.1 million b/d in 2017, partly because of monetary and fiscal policy changes, is expected to experience stronger growth in 2018 and 2019, with consumption forecast to grow by about 0.3 million b/d in each year.

In addition to growth in China and India, EIA expects petroleum and other liquid fuels consumption growth in the Middle East to rise in 2018 and 2019, with increases of 0.1 million b/d in 2018 and 0.2 million b/d in 2019. Saudi Arabia continues to see increasing domestic petroleum consumption despite the expansion of natural gas use for electric power generation. EIA expects that Saudi Arabia’s direct burn of crude oil for electric power generation will remain at roughly the 2017 level throughout the forecast period.

OECD petroleum and other liquid fuels consumption increased by 0.4 million b/d in 2017, and EIA expects it will grow by 0.5 million b/d in 2018 and by 0.3 million b/d in 2019. The main driver of OECD consumption growth is the United States. In Asia and Oceania, declining consumption in Japan in 2018 and 2019 is partially offset by modest growth in other areas. Europe is expected to see modest consumption growth in 2018 followed by a small decline in 2019.

Non‐OPEC Petroleum and Other Liquid Fuels Supply. EIA estimates that petroleum and other liquid fuels production increased by 0.7 million b/d in 2017 in countries outside of the Organization of the Petroleum Exporting Countries (OPEC). Combined production growth of 1.0 million b/d in the United States and Canada more than offset a decrease of 0.3 million b/d among the rest of the non-OPEC producers.

EIA expects non-OPEC petroleum and other liquid fuels production to rise by 2.0 million b/d in 2018 and by 1.3 million b/d in 2019. The forecast production growth is centered in the Americas, as U.S. production growth is forecast to average 1.5 million b/d in in 2018 and 1.0 million b/d in 2019. Canada and Brazil are expected to contribute combined growth of 0.4 million b/d in both 2018 and 2019.

Canada’s petroleum and other liquid fuels production grows by 0.3 million b/d in 2018 and by 0.2 million b/d in 2019 in EIA’s forecast. In Canada, oil sands projects continue to drive production growth during the forecast period, with the new phases of the Horizon oil sands project adding production starting in November 2017. In addition, the Fort Hills project, which is planned to come online in late 2018 is also expected to contribute another 0.2 million b/d to Canada’s output in 2019. In addition to production increases from oil sands, the recently-started Hebron offshore field is also expected to add 0.1 million b/d of production in 2019.

Brazil’s petroleum and other liquid fuels production is expected to grow by 0.1 million b/d in 2018 and by 0.2 million b/d in 2019, accounting for the third-highest source of non-OPEC production growth after the United States and Canada. Development of pre-salt resources and recent regulatory changes in the Brazilian oil industry are the main drivers of the growth. Continued implementation of reforms, including those to local content rules, could result in higher production growth during the forecast period. The oil-rich Santos Basin, particularly the Lula field, is expected to add enough oil production in the next two years to offset declines in Brazil’s more mature onshore and offshore areas. Production at Lula began in November 2017.

Other sources of growth for non-OPEC petroleum and other liquid fuels production in 2018 and 2019 include Kazakhstan, where EIA forecasts production to continue to increase at the Kashagan field.

Norway is expected to post a production increase of 0.1 million b/d in 2018 before production decreases modestly in 2019, as steep crude oil production decline rates offset the expected startup of the Martin Linge and Johan Sverdrup fields, along with a number of smaller fields.

Russia’s petroleum and other liquid fuels production is expected to fall by about 0.1 million b/d in 2018 and remain at that level in 2019. Russia’s output is expected to decrease from a number of oil fields, which will be partly offset by increases in new field production, including the Erginskoye field in Western Siberia. Erginskoye is expected to begin production in 2019 and to reach peak production of 0.1 million b/d beyond the end of the current forecast period.

Non-OPEC unplanned supply outages in December 2017 were 0.6 million b/d, an increase of 0.3 million b/d compared with the November level. The increase mainly reflected a 0.3 million b/d disruption in the United Kingdom, where the Forties pipeline was shut on December 11. The pipeline closure required fields that rely on the Forties pipeline for takeaway transportation to shut in production. The fields included the Buzzard, United Kingdom’s largest oilfield. Ineos, the pipeline’s operator, reportedly restarted flows at a reduced rate in late December.

During 2017, non-OPEC unplanned supply outages averaged about 0.5 million b/d, roughly 0.1 million b/d higher than the 2016 average. The increase mainly reflected outages in Canada at the Syncrude Mildred Lake facility during the spring and summer of 2017, along with production shut-ins in the U.S. Gulf of Mexico as a result of hurricanes.

OPEC Petroleum and Other Liquid Fuels Supply. OPEC crude oil production averaged 32.5 million b/d in 2017, a decrease of 0.2 million b/d from 2016. The decline was mainly a result of the November 2016 OPEC production agreement that aimed to limit OPEC crude oil output to 32.5 million b/d. Saudi Arabia and a number of Persian Gulf producers reduced crude oil production in support of the agreement. Other countries saw supplies decline because of political factors, as was the case in Venezuela. OPEC and non-OPEC participants agreed on November 30, 2017, to extend the production cuts through the end of 2018 in an effort to reduce global oil inventories. OPEC crude oil production is forecast to increase by 0.2 million b/d in 2018, partially reflecting EIA’s expectation of Libya maintaining relatively high production levels achieved near the end of 2017. EIA expects that OPEC crude oil output will rise by an additional 0.3 million b/d in 2019 as crude oil production slowly returns to pre-agreement levels.

In the fourth quarter of 2017, the average compliance rate among OPEC members was near 100%. However, the high compliance rate in the latest data includes a sizeable drop in Venezuela’s production level of more than 0.2 million b/d in 2017. As of December 2017, Venezuela’s crude oil production was about 1.8 million b/d, the lowest level since February 2003, when most of Venezuela’s oil production was shut in during an oil workers’ strike. At the time, political opposition to then-president Hugo Chavez organized the industrial action to force a new presidential election, resulting in the shuttering of all but 0.6 million b/d of crude oil production.

EIA expects Venezuela’s production to continue to fall through the forecast period as the financial situation of the state-owned Petróleos de Venezuela (PdVSA) becomes more precarious. According to trade press reporting and tanker tracking data, importing diluent for blending with its heavy oil is becoming increasingly difficult for Venezuela. Financial sanctions are also making it difficult to conduct financial transactions, with a number of banks refusing dealings with PdVSA. As a result, Venezuela’s oil exports have decreased significantly over the past six months, further limiting Venezuela’s access to much-needed cash.

OPEC noncrude oil liquids production averaged 6.8 million b/d in 2017 and is forecast to increase by 0.1 million b/d in 2018 and by 0.2 million b/d in 2019, led by increases in Iran and Qatar.

OPEC unplanned crude oil supply disruptions averaged 1.1 million b/d in December 2017, slightly less than during November. The decline in outages partly reflected increased production in Nigeria. Nigeria’s production has also recovered somewhat in 2017 from frequent attacks targeting the oil infrastructure, and the country’s December output was 1.8 million b/d, the highest crude oil production level since February 2016. Libya’s outages increased in December, as a result of outages at the Waha and AGOCO operated fields during the month, including the late December sabotage of the pipeline that transports Waha field crude oil to the Es Sider terminal. Overall, Libya’s restoration of production has reached almost 1.0 million b/d in crude oil output. However, the recent disruptions may signal a possible risk that production in the coming months could be lower than currently expected.

OPEC surplus crude oil production capacity, which averaged 2.1 million b/d in 2017, is expected to fall to 1.8 million b/d in 2018 and to 1.3 million b/d in 2019. Surplus capacity is typically an indicator of market conditions, and surplus capacity lower than 2.5 million b/d indicates a relatively tight oil market. However, ample global oil inventories make the forecast of low surplus capacity less significant.

OECD Petroleum Inventories. EIA estimates that OECD commercial crude oil and other liquid fuels inventories were 2.91 billion barrels at the end of 2017, equivalent to roughly 62 days of consumption. OECD inventories are forecast to rise to 2.96 billion barrels at the end of 2018 and then to 3.05 billion barrels at the end of 2019.

Crude Oil Prices. Brent crude oil averaged $54/barrel (b) in 2017, an increase of $10/b from 2016 levels. Prices increased fairly steadily through the second half of the year, with year-end prices higher than the annual average. Daily Brent spot prices ended 2017 near $67/b, which was the highest level since December 2014. The monthly average spot price of Brent crude oil increased by $2/b in December to $64/b, marking only the fourth time that monthly Brent crude oil prices averaged more than $60/b in the past 36 months

Most of the upward price movement in recent months reflects continuing draws in global oil inventory levels. EIA estimates that global petroleum and other liquid fuels inventories fell by an average of 0.4 million b/d in 2017, which was the first year of annual average draws since 2013. In addition, oil prices were supported by OPEC’s November 30, 2017, announcement to extend its crude oil supply reduction agreement through the end of 2018. Also, Brent prices increased in December because of a disruption to the North Sea’s Forties crude oil pipeline system early in the month. The Forties pipeline system is one of the primary distribution networks for Brent crude oil delivery in the North Sea, and its outage curtailed available supply in the near term. Trade press reports indicate the Forties pipeline system restarted operations in late December 2017.

EIA forecasts the Brent crude oil spot price will average $60/b in 2018 and $61/b in 2019. After falling in 2017, EIA expects global oil inventories to rise by 0.2 million b/d in 2018 and by 0.3 million b/d in 2019. EIA forecasts the expectation of inventory builds in 2018 and 2019 will contribute to crude oil prices declining from current levels to an average of $60/b during the first quarter of 2018. Prices are then expected to remain relatively flat through 2019.

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 the duration of, and adherence to, the current OPEC production cuts, which could influence prices in either direction. Also, 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.

Average West Texas Intermediate (WTI) crude oil prices are forecast to be $4/b lower than Brent prices in 2018 and in 2019, falling from the $6/b average price difference seen in the fourth quarter of 2017. The falling price discount of WTI to Brent in the forecast is based on the assumption that current constraints on the capacity to transport crude oil from the Cushing, Oklahoma, storage hub to the U.S. Gulf Coast will gradually lessen.

EIA estimates that the price difference between Brent and WTI reflects the competition of the two crude oils in global export markets. Thus, there are two components of the price difference, the cost of delivering WTI crude oil from its pricing point at Cushing to the U.S. Gulf Coast for export and the additional transportation costs U.S. crude oil exports incur on their way to Asia compared with costs to deliver Brent from the North Sea to Asia.

EIA estimates that, without pipeline constraints, moving crude oil from Cushing to the U.S. Gulf Coast typically costs about $3.50/b. EIA estimates that it costs approximately $0.50/b more to transport WTI from the United States to Asia than it costs to ship Brent from the North Sea to Asia. Although more infrastructure to export crude oil has been built recently, U.S. exporters must still use smaller, less-economic vessels or complex shipping arrangementsl, which add to costs.

The current values of futures and options contracts suggest uncertainty in the oil price outlook. WTI futures contracts for April 2018 delivery that were traded during the five-day period ending January 4 averaged $61/b, and implied volatility averaged 19%. 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 2018 at $52/b and $71/b, respectively. The 95% confidence interval for market expectations widens slightly over time, with lower and upper limits of $40/b and $85/b for prices in December 2018. In January 2017, the WTI futures price for April 2017 delivery averaged $55/b, and implied volatility averaged 29%, with the corresponding lower and upper limits of the 95% confidence interval at $43/b and $71/b.

Global Petroleum and Other Liquids
  2016201720182019
aWeighted by oil consumption.
bForeign currency per U.S. dollar.
Supply & Consumption (million barrels per day)
Non-OPEC Production 57.9858.6660.6961.98
OPEC Production 39.2339.3139.6440.12
OPEC Crude Oil Portion 32.6832.4732.6832.95
Total World Production 97.2197.97100.34102.11
OECD Commercial Inventory (end-of-year) 2,9682,9082,9643,049
Total OPEC surplus crude oil production capacity 1.152.091.821.34
OECD Consumption 46.7447.1147.6147.95
Non-OECD Consumption 50.2051.2852.5053.81
Total World Consumption 96.9598.39100.11101.76
Primary Assumptions (percent change from prior year)
World Real Gross Domestic Producta 2.73.23.43.2
Real U.S. Dollar Exchange Rateb 2.1-1.0-2.0-1.0

Interactive Data Viewers

Provides custom data views of historical and forecast data

STEO Data browser ›
Real Prices Viewer ›

Related Articles    
Today In Energy Daily
2017 Summer Fuels Outlook Apr-2017 PDF
Uncertainties in the Short-Term Global Petroleum and Other Liquids Supply Forecast Feb-2014 PDF
Key drivers for EIA's short-term U.S. crude oil production outlook Feb-2013 PDF
Brent Crude Oil Spot Price Forecast Jul-2012 PDF
Probabilities of Possible Future Prices Apr-2010 PDF
Energy Price Volatility and Forecast Uncertainty Oct-2009 PDF