EIA expects US liquids fuels consumption to rise

In the most recent Short-Term Energy Outlook (STEO), released Apr. 9, the US Energy Information Administration projected that world oil consumption will reach 90 million b/d in 2013 and 91.3 million b/d in 2014, lower by 100,000 b/d and 200,000 b/d, respectively, compared with last month’s STEO. World liquid fuels consumption in 2012 was 89 million b/d.

With new refining capacity coming online and investment expansion in the property market and infrastructure sector, refinery crude oil inputs in China are expected to increase in 2013. Due to weaker industrial indicators at the beginning of 2013, liquid fuels consumption in China is forecast to increase by 450,000 b/d in 2013 and by 510,000 b/d in 2014, compared with average annual growth of 540,000 b/d from 2004 through 2010. In 2012, liquid fuels consumption in China increased by 380,000 b/d in 2012, according to EIA’s estimate.

Liquid fuels consumption by members of the Organization for Economic Cooperation and Development fell by 600,000 b/d in 2012. Projected OECD consumption will decline by an additional 400,000 b/d in 2013 and 200,000 b/d in 2014, EIA said.

On the supply side, EIA estimates that liquids production from countries outside the Organization of Petroleum Exporting Countries will increase by 1.1 million b/d in 2013 and by 1.6 million b/d in 2014. With continued production growth from US tight-oil formations and Canadian oil sands, North America drives almost all the projected growth in non-OPEC supply over the next 2 years.

Production disruptions in Syria, Yemen, and South Sudan accounted for more than three quarters of the total unplanned non-OPEC supply outages, which averaged 900,000 b/d in March. The production in South Sudan has been resumed at oil fields in unity states after the establishment of a legislative body overseeing the disputed Abyei region between Sudan and South Sudan.

Crude oil production in OPEC member countries, particularly Saudi Arabia, slumped in the last quarter of 2012. Projected OPEC supply is expected to fall by 400,000 b/d in 2013, due to declined production in Saudi Arabia, and then rise by 500,000 b/d in 2014, due to production increase in Iraq and Angola.

Projected OPEC surplus capacity will average 2.9 million b/d in 2013 and 3.4 million b/d in 2014, excluding additional capacity that may be available in Iran, which is currently offline.

US oil, liquids fuels, gas

US liquids fuels consumption is expected to increase slightly by 60,000 b/d in 2013 and by 30,000 b/d in 2014. Driven by increase in industrial output and winter weather in the Northeast, projected distillate fuel oil consumption is forecast to increase at an average rate of 50,000 b/d in 2013 and 20,000 b/d in 2014. Liquefied petroleum gases consumption, reflecting continued growth in petrochemical activity and assumptions of normal weather, is forecast to increase by 50,000 b/d in 2013 and a further 10,000 b/d in 2014. Motor gasoline and jet fuel consumption remain relatively flat in 2013 and 2014.

Over the next 2 years, drilling in tight oil plays in the onshore Williston, Western Gulf, and Permian basins will contribute to the rapid growth of US crude oil production. Projected production is expected to climb to 7.3 million b/d in 2013 and to 7.9 million b/d in 2014 from an average 6.5 million b/d in 2012. Growing domestic crude oil production has helped to lower crude oil imports. US crude oil gross imports are expected to be exceeded by domestic production as early as yearend.

US natural gas consumption is expected to average 70.3 bcfd in 2013 and 70.1 bcfd in 2014. Projected natural gas marketed production increases to 69.3 bcfd in 2013 and 69.4 bcfd in 2014 from 69.1 bcfd in 2012. Over the forecast period, federal Gulf of Mexico production declined while onshore production increased slightly. Imports of LNG are to remain at minimal levels of less than 500 MMcfd in both 2013 and 2014.

US working natural gas stocks, as of Mar. 29, totaled 1,687 bcf, which is 37 bcf below the 5-year average.

US economic assumptions

EIA’s STEO assumes 1.7% US real GDP growth in 2013 and 2.7% in 2014. Total industrial production growth in the manufacturing sector is 3.4% in 2013, rising to 3.6% in 2014.

Private fixed investment growth average 5.3% and 8.9% over 2013 and 2014, driven partly by business equipment and software spending and increasing expenditures on buildings. Improving housing sector is to grow an average of 22% and 31% over 2013 and 2014, respectively.

Real consumption expenditures grow at 2% in 2013 and at 2.3% in 2014. Exports over the next 2 years will nearly double from 2.8 to 5.2%. Government expenditures in the forecast will fall in 2013 and 2014.

The unemployment rate is expected to gradually fall from 7.6% in March to 7.2% in December 2014.

Contact Conglin Xu at conglinx@ogjonline.com.

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