Global Petroleum and Other Liquids
EIA projects world petroleum and other liquids supply to increase by 1.4 million barrels per day (bbl/d) in 2014 and 1.3 million bbl/d in 2015, with most of the growth coming from countries outside of the Organization of the Petroleum Exporting Countries (OPEC). The United States and Canada will account for much of this growth. Projected world liquid fuels consumption grows by an annual average of 1.2 million bbl/d in 2014 and 1.4 million bbl/d in 2015. Countries outside the Organization for Economic Cooperation and Development (OECD), notably China, drive expected consumption growth.
EIA expects the combination of increased non-OPEC total liquids supply and OPEC noncrude supply to exceed world liquids demand growth over the next two years. The call on OPEC crude oil and global stocks falls from an average of 30.0 million bbl/d in 2013 to 29.5 million bbl/d in 2015 (Call on OPEC is world consumption less non-OPEC production and OPEC noncrude oil production). Forecast non-OPEC supply growth also contributes to an increase in global surplus crude oil production capacity from an average of 2.1 million bbl/d in 2013 to 3.6 million bbl/d in 2015.
Global Petroleum and Other Liquids Consumption
EIA estimates that global consumption grew by 1.2 million bbl/d in 2013, averaging 90.4 million bbl/d for the year. EIA expects global consumption to grow 1.2 million bbl/d in 2014 and 1.4 million bbl/d in 2015. Projected global oil-consumption-weighted real GDP, which increased by an estimated 2.3% in 2013, grows by 2.9% and 3.4% in 2014 and 2015, respectively.
Non-OECD countries account for all of the expected consumption growth in 2014 and nearly all of the growth in 2015. China is the leading contributor to projected global consumption growth, with consumption increasing by 400,000 bbl/d in 2014 and 430,000 bbl/d in 2015. However, China’s economic and oil consumption growth rates have moderated compared with rates before 2012, when annual GDP growth exceeded 9% and oil consumption growth averaged almost 800,000 bbl/d from 2009 through 2011.
EIA expects lower OECD consumption in 2014, led by projected consumption declines in both Japan and Europe. EIA expects Japan’s oil consumption to fall by an annual average of 150,000 bbl/d in 2014 and 2015, as the country continues to increase natural gas and coal consumption in the electricity sector and returns some nuclear power plants to service in the second half of 2014 and in 2015. EIA projects that OECD Europe’s consumption, which fell by 100,000 bbl/d in 2013, will decline by 60,000 bbl/d in 2014 and then remain relatively flat in 2015. U.S. liquids consumption, which increased by 400,000 bbl/d in 2013, is expected to remain relatively flat in 2014 and then increase by 90,000 bbl/d in 2015.
EIA estimates that non-OPEC liquids production grew by 1.3 million bbl/d in 2013, averaging 54.0 million bbl/d for the year. EIA expects non-OPEC liquids production to grow by 1.6 million bbl/d in 2014 and 1.3 million bbl/d in 2015. EIA forecasts production from the United States and Canada to grow by a combined annual average of 1.4 million bbl/d in 2014 and 1.2 million bbl/d in 2015. EIA estimates that the Former Soviet Unionâ€™s production will rise by an annual average of 0.16 million bbl/d over the forecast period, led by Russia in 2014 and Kazakhstan in 2015.
Unplanned supply disruptions among non-OPEC producers averaged 0.6 million bbl/d in March 2014, about 40,000 bbl/d lower than in February as a result of fewer outages in the North Sea and Indonesia. South Sudan, Syria, and Yemen accounted for almost 90% of total non-OPEC supply disruptions. EIA does not assume a disruption to oil supply or demand as a result of ongoing events in Ukraine.
EIA estimates that OPEC crude oil production averaged 30.0 million bbl/d in 2013, a decline of 0.9 million bbl/d from the previous year, primarily reflecting increased outages in Libya, Nigeria, and Iraq, along with strong non-OPEC supply growth. EIA expects OPEC crude oil production to fall by 0.2 million bbl/d in both 2014 and 2015, as a result of supply disruptions in OPEC and cutbacks in crude oil production to accommodate increased supplies in non-OPEC countries.
Unplanned crude oil supply disruptions among OPEC producers averaged 2.6 million bbl/d in March 2014, 0.3 million bbl/d higher than the previous month. Libya continues to experience swings in its production, contributing to changes in the OPEC disruption estimate. Unplanned disruptions in Iraq escalated in March, averaging nearly 0.4 million bbl/d, as a result of attacks on the Kirkuk-Ceyhan pipeline.
EIA expects that OPEC surplus capacity, which is concentrated in Saudi Arabia, will average 2.3 million bbl/d in 2014 and 3.6 million bbl/d in 2015. This build in surplus capacity reflects production cutbacks by some OPEC members adjusting for the higher supply from non-OPEC producers. These estimates do not include additional capacity that may be available in Iran but is currently offline because of the effects of U.S. and European Union sanctions on Iran’s oil sector.
Note: Shaded area represents 2003-2013 average (2.2 million barrels per day)
OECD Petroleum Inventories
EIA estimates that OECD commercial oil inventories totaled 2.58 billion barrels by the end of 2013, equivalent to roughly 55 days of consumption. Projected OECD oil inventories rise to 2.61 billion barrels at the end of 2014 and 2.64 billion barrels at the end of 2015.
Note: Colored band represents the range between the minimum and maximum observed days of supply from Jan. 2009 – Dec. 2013.
Crude Oil Prices
Brent crude oil spot prices in March averaged $107/bbl. This was the ninth consecutive month Brent crude oil spot prices averaged between $107/bbl and $112/bbl. The Brent crude oil price is projected to average $105/bbl and $101/bbl in 2014 and 2015, respectively.
The WTI crude oil spot price, which fell to an average of $95/bbl in January 2014, increased to an average of $101/bbl in February and March as a result of strong Midwestern refinery runs and the startup of the Marketlink pipeline moving crude from Cushing to the Gulf Coast. EIA expects that WTI crude oil prices will average $96/bbl in 2014, $1/bbl higher than in last month’s STEO, and $90/bbl during 2015. The discount of WTI crude oil to Brent crude oil, which averaged more than $13/bbl from November 2013 through January 2014, fell to an average of nearly $7/bbl in March 2014. EIA expects the discount of WTI crude oil to Brent crude oil to grow in the coming months to an average $9/bbl in 2014 and $11/bbl in 2015, reflecting the economics of transporting and processing the growing production of light sweet crude oil in U.S. and Canadian refineries.
Energy price forecasts are highly uncertain, and the current values of futures and options contracts suggest that prices could differ significantly from the forecast levels (Market Prices and Uncertainty Report). WTI futures contracts for July 2014 delivery, traded during the five-day period ending April 3, 2014, averaged $99/bbl. Implied volatility averaged 17%, establishing the lower and upper limits of the 95% confidence interval for the market’s expectations of monthly average WTI prices in June 2014 at $85/bbl and $115/bbl, respectively. Last year at this time, WTI for July 2013 delivery averaged $96/bbl and implied volatility averaged 18%. The corresponding lower and upper limits of the 95% confidence interval were $82/bbl and $113/bbl.