EIA: Production outages tightened global oil market in August

Unplanned liquid fuels production outages, peaking summer demand, and rising concerns over the conflict in Syria and its regional implications contributed to a tighter global oil market in August, according to the US Energy Information Administration’s most recent Short-Term Energy Outlook.

World production disruptions reached 2.7 million b/d during the month, the highest level since January 2011. Of the total volume, 2.1 million b/d was attributable to the Organization of the Petroleum Exporting Countries, recording the highest disruption level since January 2009 when EIA began tracking this information.

Global liquid fuels consumption is estimated to increase by 1.1 million b/d in 2013 and by another 1.2 million b/d in 2014, according to EIA. China, the Middle East, Central and South America, and other countries outside of the Organization for Economic Cooperation and Development account for “essentially all consumption growth,” EIA’s outlook said.

EIA forecasts non-OPEC liquid fuels production to increase by 1.6 million b/d in 2013 and by 1.4 million b/d in 2014, with the largest production growth from North America.

EIA expects that OPEC liquid fuels production will decline by 0.8 million b/d in 2013 and 0.2 million b/ d in 2014, reflecting unplanned production outages among some OPEC producers as well as decreases in Saudi Arabia’s production in accommodating the increase of non-OPEC supply.

The Brent crude oil annual average spot price declines from $112/bbl in 2012 to $108/bbl in 2013 and $102/bbl in 2014, reflecting the increasing supply of liquid fuels from non-OPEC countries. The forecast WTI crude oil spot price averages $99/bbl in 2013 and $96/bbl in 2014, $2/bbl and $3/bbl higher, respectively, than last month’s STEO.

US crude oil, liquid fuels

Total US liquid fuels consumption in 2013 is estimated to be 18.68 million b/d, up 0.7% from last year. As improving fuel efficiencies more than offset increases in highway travel and air freight, EIA projects lower gasoline consumption and flat jet fuel consumption. In 2014, total consumption of liquid fuels is projected to be 18.72 million b/d, up only 0.2%.

US crude oil production will average 7.5 million b/d this year, up from 6.5 million b/d last year. Projected US crude oil production is 8.4 million b/d in 2014. EIA expects liquid fuel net imports, including crude oil and petroleum products, to average 5.4 million b/d in 2014, down from 7.4 million b/d in 2012.

EIA increases the average regular gasoline retail price forecasts during the third and fourth quarters of 2013 to $3.60/gal and $3.44/gal, respectively, from $3.59/gal and $3.33/gal in last month’s outlook. EIA expects full-year regular gasoline retail prices, which averaged $3.63/gal in 2012, to average $3.55/gal in 2013 and $3.43/gal in 2014, due to falling crude oil prices.

US natural gas

Forecast average US gas demand in 2013 is 69.9 bcfd, up 0.2 bcfd from last year and flat from EIA’s previous monthly outlook. The amount of natural gas used for residential and commercial space heating is expected to increase due to colder winter temperatures in 2013 and 2014.

Projected natural gas consumption in the electric power sector declines to 22.1 bcfd in 2013 and 21.6 bcfd in 2014 from 25 bcfd in 2012, primarily driven by the projected year-over-year increases in natural gas prices.

While EIA expects natural gas production growth to continue in 2013 and 2014, the projected increases of 1.1% and 0.7% are far below 2011 and 2012 growth.

Natural gas working inventories ended August at an estimated 3.2 tcf, down 210 bcf from the same time last year. EIA projects inventories will total 3.8 tcf at the end of the injection season and 1.9 tcf at the end of the winter heating season.

EIA’s average 2013 Henry Hub natural gas spot price forecast is $3.68/MMbtu, compared with $3.71/MMbtu in last month’s outlook. EIA expects that Henry Hub spot prices will average $3.91/MMbtu in 2014.

Contact Conglin Xu at conglinx@ogjonline.com.

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