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June 21, 2011

EIA forecasts increased oil demand, need for additional supply from OPEC producers in 2011

graph of World oil demand less non-OPEC supply and OPEC natural gas liquids, as described in the article text

Source: U.S. Energy Information Administration based on the Short-Term Energy Outlook, June 2011
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World oil demand is forecast to increase by 1.7 million barrels per day (bbl/d) in 2011, according to the U.S. Energy Information Administration's (EIA) June 2011 Short-Term Energy Outlook (STEO). The projected increase in global oil demand coincides with non-OPEC supply constraints and the ongoing Libyan production shortfall. As a result, EIA estimates that, after accounting for OPEC non-crude liquids and non-OPEC supply, the call on OPEC crude and inventories will grow by 2.2 million and 1.4 million bb/d in the third and fourth quarters of 2011, respectively, from the second-quarter levels.

Higher production from the rest of OPEC will be required to meet demand growth and replace significant amounts of Libyan supply through the end of 2012 due to the Libyan oil supply disruption.

Crude oil prices reached their highest level of this year at the end of April, but fell by over 10% by mid-June. Despite the recent fall in crude oil and gasoline prices, oil markets are more likely to tighten than soften in the short term. The second quarter of the year is typically a low point in global oil consumption, a pattern reinforced this year by the unusually wide scope of refinery outages and the impact of the earthquake and tsunami in Japan.

The usual third-quarter rebound in oil consumption is likely to be greater this year than normal. This is due to a number of factors, including:

  • Japan's electric utilities are increasing output from oil-fired generators
  • Electricity shortages in China will lead to increase in use of diesel-fired generators
  • Cooling demand in the Middle East is expected to rise to record levels this summer.

Full details of this article are available in This Week in Petroleum .