Production of crude oil from the Organization of Petroleum Exporting Countries averaged 32.5 million b/d in 2017, a 200,000-b/d decrease from 2016 levels, and OPEC oil production will average 32.7 million b/d in 2018, according to the US Energy Information Administration’s latest Short-Term Energy Outlook.
Despite the extension of the production-cut agreement to yearend 2018 by OPEC and non-OPEC producers, EIA forecasts higher output from non-OPEC countries to contribute to growth in total liquid fuels supply in 2018. The non-OPEC outlook is 100,000 b/d higher than EIA’s November STEO, averaging 60.3 million b/d in 2018, which would be 1.7 million b/d higher than 2017 levels.
EIA expects that crude oil price increases in late 2017 will contribute to US crude oil production rising to more than 10 million b/d by mid-2018. Overall, US crude oil production is forecast to increase by an average of 800,000 b/d in 2018.
Canada, Brazil, Norway, the UK, and Kazakhstan are forecast to add a combined 700,000 b/d of liquids production in 2018.
This growth, together with the forecast 200,000 b/d growth in OPEC crude oil production and another 100,000 b/d increase in OPEC non-crude liquids production, results in forecast total global liquids production growth of 2.1 million b/d in 2018.
Liquids fuels demand
Despite higher oil prices, EIA expects global liquid fuels demand to increase by more than 1.6 million b/d in 2018, up from growth of 1.4 million b/d in 2017. Demand growth is not forecast to keep pace with supply growth, however, resulting in global liquids inventories increasing modestly in 2018.
With global inventories expected to increase in 2018, EIA forecasts Brent crude oil prices will decline from current levels to an average of $57/bbl in 2018, which is $2/bbl higher than forecast in the November STEO. EIA forecasts Brent spot prices to average $54/bbl in 2017.
OECD inventories
Since reaching a record high of almost 3.09 billion bbl at the end of July 2016, total liquid fuels inventories from member countries of the Organization for Economic Cooperation and Development have fallen 137 million bbl to 2.95 billion bbl at the end of November. Over the same period, the surplus to the 5-year average has declined 210 million bbl, ending November at an estimated 174 million bbl.
As noted by EIA, going forward, the 5-year average will include a higher proportion of data points from 2015-17, which were years of high inventory levels, resulting in higher 5-year average stock levels for comparison. So, although EIA forecasts OECD inventories to increase by 51 million bbl from December 2017 through May 2018, the level of OECD inventories relative to the 5-year average is expected to decrease 29 million bbl because of the increase in the 5-year average.
US refinery, crude oil imports
Total US crude oil inputs to refineries set an all-time high for the month of November, reflecting the refining sector’s return from hurricane disruptions and maintenance season in the third quarter. Increased refinery demand, in addition to the Keystone Pipeline disruption, contributed to the stock draws from Cushing, Okla., and likely provided upward price pressure on WTI front-month futures prices.
According to EIA, the OPEC crude oil production-cut agreement and other supply reductions have changed US crude oil import trends in 2017. Saudi Arabia reduced crude oil exports to most regions, including to the US, as a result of both its voluntary crude oil production cuts and the increase in the amount of crude oil Saudi Arabia refines domestically. Total Saudi Arabian crude oil exports fell to 6.5 million b/d in September 2017, the lowest level since March 2011, according to the Joint Organization Data Initiative (JODI).
Motiva Enterprises LLC, which owns the largest refinery in the US in Port Arthur, Tex., is a wholly owned refinery subsidiary of Saudi Arabia’s national oil company, Saudi Aramco. Motiva’s imports of Saudi Arabian crude oil decreased significantly in 2017, down to 30% of Motiva’s total crude oil imports in September, compared with 65% on average during 2016. Overall, total US crude oil imports from Saudi Arabia fell to the lowest level in 30 years, with some of that decline made up by increased imports from Iraq.
Reduced production in Venezuela due to operational and financial difficulties has lowered the available amount of Venezuelan crude oil for export, with some cargoes being diverted away from the US to other countries to repay oil-for-loan agreements. In September, total US imports of Venezuelan crude oil fell to the lowest point since 2003.
Natural gas
Natural gas inventories fell further below the 5-year average in recent weeks until a rare injection into storage for the week ended Dec. 1 brought inventories up to 36 bcf below the 5-year average.
Increased takeaway capacity from Appalachia is expected to result in increased natural gas production in the coming months and could limit significant upward price pressure, although colder-than-normal temperatures throughout the rest of 2017 could contribute to price increases.
The Henry Hub natural gas spot price averaged $3.01/MMbtu in November, almost 14¢/MMbtu higher than in October. EIA expects that price to average $3.13/MMbtu in December and average $3.12/MMbtu in 2018.
Contact Conglin Xu at [email protected].
