Crude oil supplies are expected to remain tight despite the Organization of Petroleum Exporting Countries’ decision Sept. 11 to increase authorized production by 500,000 b/d starting Nov. 1, two US government forecasters said.
Most outlooks already included such an increase when OPEC took its action, according to Matt Cline and Erik Kreil, economists at the US Energy Information Administration. “We’d built another 500,000 b/d into our forecast. We think OPEC will have to keep raising production to keep inventories from plummeting,” Kreil told OGJ on Sept. 14.
In its latest short-term energy outlook, which EIA released on Sept. 11, the US Department of Energy forecast and analysis division reduced its projection for OPEC crude oil production in the fourth quarter by 100,000 b/d from its previous monthly forecast to 30.9 million b/d.
The expected decline stems from planned oil field maintenance in the UAE. Kreil said weekly impacts could be higher since the estimate represents a 3-month average. Even factoring in the reduction, EIA forecast average OPEC production during the fourth quarter will be 500,000 b/d higher than a year earlier, he added.
Outside OPEC, EIA also reduced its average 2007 production growth estimate by 100,000 b/d from its August short-term outlook to 600,000 b/d. Anticipated production declines in Mexico as its producing region recovers from damage caused by Hurricane Dean represent about 51,000 b/d of the downward revision, Cline said.
Recent attacks on pipelines should not affect Mexico’s oil exports, he told OGJ. “They will have more of an impact on the country’s refineries. The impact will be on world product markets as [Mexico’s state-owned Petroleos Mexicanos] puts out tenders for products from the United States and other countries to compensate for reduced refinery runs,” Cline said.
Most of the remaining reduction in EIA’s projections for non-OPEC production growth reflects declining production from maturing fields and other natural occurrences, he added.
EIA anticipates that expected gains in demand for OPEC oil will likely keep surplus production capacity within the cartel at 2-3 million b/d through 2008, mostly in Saudi Arabia. “The modest level of worldwide surplus capacity makes the market vulnerable to unexpected supply disruptions,” it said in its latest short-term outlook.
Unlike many private analysts and the International Energy Agency, EIA focuses on commercial inventories, according to Kreil. It does not rely on official government announcements for its OPEC production estimates but uses independent sources instead, he explained.
“We’re assuming that the situation in Nigeria is not going to get any better. It’s confusing in terms of spare capacity, which many people want to use. We don’t. We expect [the unrest and disruptions] to continue so we’re keeping our basic assumption unchanged until we see a dramatic improvement. The same is true with Iraq,” Kreil said.
