BMI: US to see further oil, gas supply shortfalls

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Dec. 29 -- Analyst Business Monitor International (BMI) predicts that the US will account for 89.87% of North American regional oil demand by 2012, while contributing 65.63% to its supply.

In North America, overall oil consumption reached 23 million b/d in 2007 and is set to increase to 23.04 million b/d by 2012, BMI said.

In 2007 North America also consumed 747 billion cu m (bcm) of natural gas, with demand of 826 bcm targeted for 2012—a 10.6% growth.

Production of 730 bcm in 2007 should rise to 733 bcm in 2012, which implies net imports rising to some 93 bcm by the end of the period.

The US share of North American gas consumption in 2007 was 87.42%, while it provided 74.82% of production. By 2012 US share of gas consumption is forecast to be 87.26% and production to be 74.35%.

Price increase over 1Q
In second-quarter 2008, BMI estimates that the OPEC basket price averaged just under $115/bbl—up 24% from the first quarter 2008 level.

The OPEC basket price exceeded $127/bbl on May 22, slipping back towards $121/bbl later in the month.

In June BMI assumed an average of around $120/bbl for a quarterly estimate of $114.98/bbl.

Estimated second-quarter average prices for the main marker blends are now $118.63 for Brent, $119.61 for West Texas Intermediate, and $115.89/bbl for Russian Urals (Mediterranean delivery).

"Our projections for 2008 as a whole have been revised upwards from the last quarterly report," the analyst said.

"We are now assuming an OPEC basket price average of $106/bbl for 2008, compared with the $81 estimate provided by our last quarterly report," BMI said.

Based on recent price differentials, this implies Brent at $109.71, WTI averaging $110.64/bbl, and Urals at $106.88/bbl.

BMI estimates that US real gross domestic product growth is at 1.2% for 2008, down from 2.2% in 2007.

"We are assuming an average annual 2.5% growth in 2008-12," it said. "Average US oil and liquids production is now estimated at 7.08 million b/d in 2008."

2012 projections
By 2012, BMI forecasts US oil-liquids output of 7.35 million b/d. Its estimate for 2008 US oil demand is now a lower 20.2 million b/d, because of the impact of higher prices on consumption.

"We now see US oil consumption hitting 20.71 million b/d by 2012," the analyst said. "This would require crude imports of 13.36 million b/d."

During 2007-18, BMI is forecasting that US oil production will increase 14.1% and output will peak at 7.92 million b/d in 2017.

Given that oil consumption is forecast to increase only 4.5%, imports ease from 13.82 million b/d in 2007 to 13.79 million b/d during the forecast period.

Gas production is expected to rise to 570 bcm in 2018 from the 2007 level of 546 bcm.

Demand is forecast to rise to 747 bcm from 653 bcm, requiring an increase of net imports to 177 bcm, in the form of pipeline volumes and LNG.

Contact Eric Watkins at hippalus@yahoo.com.

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