We estimate approximately 0.4 million barrels per day (b/d) of crude oil production went offline in Libya in late December. This outage contributed to the increase in the Brent spot price to $89 per barrel (b) as of January 18, 2022, from a December average of $74/b. In addition, protests in Kazakhstan have likely also put upward pressure on the Brent crude oil price as a result of the increased risk of outages in that country. We estimate that combined OPEC unplanned production outages increased in December and likely will increase in January as a result of the outages in Libya. Nonetheless, we forecast OPEC crude oil and total liquid fuels production will increase by 2.7 million b/d in 2022 to 34.3 million b/d and that OPEC will still hold more spare production capacity than historical averages.
Although crude oil production averaged nearly 1.2 million b/d in Libya during 2021, political disputes continue to create considerable uncertainty. In December 2021, production averaged less than 1.1 million b/d because armed militants shut in an estimated 370,000 b/d from the four key oil fields in the southwestern part of the country. Most of the shut-in production was from the Sharara field. We estimate that OPEC unplanned outages increased to 2.2 million b/d in December 2021 as a result of these outages (Figure 1). In addition, ongoing maintenance issues on the country’s aging infrastructure also continue to limit oil production in Libya, and political risk is heightened as a result of the indefinite delay in Libya’s presidential and parliamentary elections that were scheduled for December 24, 2021.
Despite the recent increase in unplanned outages, we estimate that OPEC members still hold higher-than-average spare production capacity (Figure 2). The extent to which OPEC member countries use their available production capacity is often an indicator of how tight global oil markets are. We define spare capacity as the volume of production that can be brought online within 30 days and sustained for a subsequent 90 days. Our estimate of OPEC spare capacity indicates the market's ability to respond to potential crises that reduce oil supplies.
We recently reassessed OPEC spare capacity and how total production capacity has changed since the OPEC+ agreement was implemented in May 2020. A review of available total production capacity indicated that our previous assessment was overestimating surplus production capacity. In our January Short-Term Energy Outlook (STEO), we revised our estimates of OPEC surplus crude oil production capacity beginning in 2020, and we now estimate that OPEC surplus production capacity averaged over 6.0 million b/d in 2021. This downward revision is 1.1 million b/d less than estimated in last month’s STEO, but it is still considerably more than the average surplus capacity of 2.2 million b/d between 2012 and 2019. We forecast that OPEC surplus production capacity will average 4.0 million b/d in 2022, 1.2 million b/d less than in last month’s STEO, and 3.9 million b/d in 2023, reflecting both the downward revision and increasing OPEC output.
Even with increased OPEC crude oil production, remaining surplus production capacity likely will be more than sufficient to meet additional demand even if consumption exceeds our expectations. These estimates do not include additional capacity in Iran, Venezuela, and Libya, which are offline and are considered to be disrupted volumes. Our forecast assumes that the sanctions that are constraining Iran’s and Venezuela’s petroleum exports will remain in place through the end of 2023.
In the January STEO, we forecast that OPEC petroleum production will increase by nearly 2.7 million b/d in 2022, the largest year-over-year increase in OPEC production since 2004. Most of this increase occurs in the first half of the year (Figure 3) as many OPEC producers boost production, most notably Saudi Arabia, United Arab Emirates (UAE), Kuwait, and Iraq. We forecast that OPEC petroleum production will average 34.4 million b/d in 2023, increasing by slightly over 0.1 million b/d year over year. Non-OPEC petroleum production will average 66.8 million b/d in 2022 and increase by nearly 1.7 million b/d in 2023 to average 68.4 million b/d.
Most of the growth in our forecast of OPEC petroleum production in the January STEO was driven by increased crude oil production by producers in the Middle East. This increase in crude oil production is largely in response to the January 2022 OPEC+ meeting, when participants reaffirmed their decision to continue to increase output by 0.4 million b/d each month until all of the production cuts are reversed. More than 60% of crude oil production growth will come from Saudi Arabia, UAE, Kuwait, and Iraq, where the largest amount of surplus crude oil production capacity is available and can be used in response to the new production targets.
The future of OPEC production remains uncertain, particularly the extent to which the countries that participate in the OPEC+ agreement will adhere to production targets. We assume that OPEC+ participants will not fully increase production to their targets in 2022 due to a combination of factors. These factors include some countries’ inability to meet their targets because of wide-ranging challenges in bringing idled capacity back online, and other countries will limit production increases to avoid large global imbalances between oil production and oil demand that would result in lower crude oil prices.
U.S. average regular gasoline and diesel prices increase
The U.S. average regular gasoline retail price increased more than 1 cent to $3.31 per gallon on January 17, 93 cents higher than a year ago. The Gulf Coast price increased nearly 4 cents to $2.96 per gallon, the East Coast price increased more than 1 cent to $3.24 per gallon, and the West Coast price increased less than 1 cent, remaining virtually unchanged at $4.16 per gallon. The Rocky Mountain price decreased nearly 2 cents to $3.33 per gallon, and the Midwest price decreased less than 1 cent, remaining virtually unchanged at $3.11 per gallon.
The U.S. average diesel fuel price increased nearly 7 cents to $3.73 per gallon on January 17, $1.03 higher than a year ago. The Midwest price increased more than 8 cents to $3.60 per gallon, the Gulf Coast price increased nearly 8 cents to $3.46 per gallon, the East Coast price increased more than 7 cents to $3.72 per gallon, the West Coast price increased more than 3 cents to $4.45 per gallon, and the Rocky Mountain price increased more than 1 cent to $3.68 per gallon.
Residential heating fuel prices increase
As of January 17, 2022, residential heating oil prices averaged almost $3.61 per gallon, nearly 15 cents per gallon above last week’s price and $1.05 per gallon higher than last year’s price at this time. Wholesale heating oil prices averaged almost $2.78 per gallon, 15 cents per gallon above last week’s price and more than $1.07 per gallo¬¬n above last year’s price.
Residential propane prices averaged nearly $2.73 per gallon, more than 2 cents per gallon above last week’s price and more than 54 cents per gallon above last year’s price. Wholesale propane prices averaged almost $1.35 per gallon, nearly 6 cents per gallon above last week’s price and almost 18 cents per gallon above last year’s price.
Propane/propylene inventories decline
U.S. propane/propylene stocks decreased by 3.7 million barrels last week to 58.7 million barrels as of January 14, 2022, 4.1 million barrels (6.5%) less than the five-year (2017-2021) average inventory levels for this same time of year. Gulf Coast, Midwest, East Coast, and Rocky Mountain/West Coast inventories decreased by 1.7 million barrels, 1.4 million barrels, 0.4 million barrels, and 0.2 million barrels, respectively.
|Retail prices||Change from last|
|Click to chart this seriesGasoline||3.306||0.011up-arrow||0.927up-arrow|
|Click to chart this seriesDiesel||3.725||0.068up-arrow||1.029up-arrow|
|Click to chart this seriesHeating Oil||3.608||0.148up-arrow||1.050up-arrow|
|Click to chart this seriesPropane||2.727||0.022up-arrow||0.544up-arrow|
|Futures prices||Change from last|
|Click to chart this seriesCrude oil||83.82||4.92up-arrow||31.46up-arrow|
|Click to chart this seriesGasoline||2.419||0.120up-arrow||0.891up-arrow|
|Click to chart this seriesHeating oil||2.634||0.152up-arrow||1.041up-arrow|
|*Note: Crude oil price in dollars per barrel.|
|Stocks||Change from last|
|Click to chart this seriesCrude oil||413.8||0.5up-arrow||-72.7down-arrow|
|Click to chart this seriesGasoline||246.6||5.9up-arrow||1.4up-arrow|
|Click to chart this seriesDistillate||128.0||-1.4down-arrow||-35.7down-arrow|
|Click to chart this seriesPropane||58.686||-3.693down-arrow||-1.132down-arrow|