In its Short-Term Energy Outlook for May, the US Energy Information Administration estimates that global petroleum and other liquid fuels inventory builds will average 1 million b/d in 2016 and 200,000 b/d in 2017 compared with the average of 1.4 million b/d in 2016 and 400,000 b/d in 2017 forecast in last month’s STEO.
Lower inventory build forecasts mainly reflect revised historical rates of demand growth in 2015, along with the expectation of higher demand growth in 2016 and 2017.
EIA expects global oil inventory draws to begin in third-quarter 2017.
Global petroleum, liquids consumption
EIA increased its estimates of historical and forecast global consumption for 2015-17 compared with April’s STEO. Global consumption of petroleum and other liquid fuels is now estimated to have increased by 1.4 million b/d in 2015, 100,000 b/d higher than previously estimated and reflecting upward revisions to 2015 growth in both China and India.
EIA now expects global oil consumption to increase by 1.4 million b/d in 2016 and by 1.5 million b/d in 2017, 300,000 b/d and 200,000 b/d higher, respectively, than forecast in the STEO for April. China’s consumption is forecast to grow by 400,000 b/d in both 2016 and 2017.
Overall consumption of petroleum and other liquid fuels in countries outside of the Organization for Economic Cooperation and Development increased by an estimated 900,000 b/d in 2015. Non-OECD consumption growth is expected to be 1.2 million b/d in 2016 and 1.4 million b/d in 2017.
OECD petroleum and other liquid fuels consumption rose by 500,000 b/d in 2015. OECD consumption is expected to increase by 200,000 b/d in 2016 and by 100,000 b/d in 2017. Growth in US consumption more than offsets decreases in consumption in OECD Europe and Japan in 2016 and 2017.
Non-OPEC petroleum, other liquids
EIA expects production outside the Organization of Petroleum Exporting Countries to decline by 700,000 b/d in 2016 and by 200,000 b/d in 2017, with most of the production declines occurring in the US.
Forecast total US production of liquid fuels declines by 600,000 b/d in 2016 and by 100,000 b/d in 2017, as declining crude oil production is partially offset by expected growth in HGL production, liquid biofuels production, and refinery processing gain.
Outside of the US, forecast non-OPEC production declines by 200,000 b/d in 2016 and by 100,000 b/d in 2017. “Petroleum and other liquids production, with the exception of US tight oil plays, is relatively robust through 2017 because of investments that were committed to projects when oil prices were higher. Although oil companies have reduced investments, most of the cuts have been to capital budgets that largely affect production levels beyond 2017,” EIA said.
After increasing in 2014 and 2015, production in the North Sea is expected to return to its long-term declining trend in 2016 and 2017, as the planned starts of several projects are not enough to offset the region’s natural decline rates. Production is expected to fall in China over the forecast period by nearly 200,000 b/d as the three largest state-owned oil companies have announced capital expenditure cuts and output reductions. Also, fewer new offshore developments in China are expected to come online in 2016 compared with 2015.
Canada’s production is expected to increase by less than 100,000 b/d in 2016 and by 300,000 b/d in 2017. Compared with the April STEO, EIA revised its outlook for Canada’s 2016 production growth downward by 200,000 b/d to reflect oil sands production outages caused by wildfires.
OPEC supply, crude prices
OPEC crude oil production averaged 31.5 million b/d in 2015, an increase of 800,000 b/d from 2014, led by Iraq and Saudi Arabia. According to the May STEO, OPEC crude oil production will rise by 900,000 b/d in 2016, with Iran accounting for most of the increase. Forecast OPEC production rises by an additional 700,000 b/d in 2017, as major OPEC producers are expected to continue their strategy of maintaining market share.
OPEC surplus crude oil production capacity, which averaged 1.6 million b/d in 2015, is expected to be 1.5 million b/d in 2016 and 1.3 million b/d in 2017.
North Sea Brent crude oil prices averaged $42/bbl in April, a $3/bbl increase from March. Brent crude oil prices are forecast to average $41/bbl in 2016 and $51/bbl in 2017, $6/bbl and $10/bbl higher than forecast in last month’s STEO, respectively.
West Texas Intermediate crude oil prices are forecast to average slightly less than Brent in 2016 and to be the same as Brent in 2017.