Economists are generally hesitant about using "r" words. Many waited a year ago before admitting that the world had entered a recession. They're equally cautious now about any possible rebound.
The US Energy Information Administration nevertheless raised by $7/bbl its forecast price of West Texas Intermediate crude in its latest short-term energy outlook because it believes sustained economic growth in China and elsewhere in Asia may lead to a rebound in demand.
WTI prices should average $77/bbl in the October-March period and reach $81/bbl by December 2010 if US and world economic conditions keep improving, particularly in Asia where growth has been stronger than expected, EIA said on Nov. 10 in its latest monthly forecast.
The forecast assumes US real domestic product will grow by 1.9% in 2010 while world oil consumption-weighted GDP increases by 2.6%.
High inventories tempered EIA's assessment. "Although Organization for Economic Cooperation and Development inventories remain high, optimism for a continued economic turnaround, combined with the impact of Organization of Petroleum Exporting Countries production cuts, have driven oil prices higher," it said.
Could weaken
"However, if the economic recovery stalls and oil consumption doesn't rebound, oil prices could weaken given the high level of inventories," EIA said.
While it expects OECD members' oil consumption to continue to show another year-to-year decline in the fourth quarter, demand in non-OECD countries should "more than offset these losses, leading to the first growth in global oil consumption in five quarters," it said.
EIA said it projects a 1.26 million b/d growth in world oil consumption during 2010, with non-OEDC countries representing the largest share. It expects OECD consumption to increase by only 100,000 b/d next year, largely because of a projected turnaround in the US, which would reverse a decline that began in 2005.
'Surprisingly strong'
Oil production outside OPEC averaged 50.1 million b/d during 2009's first three quarters, about 500,000 b/d above the average for the comparable 2008 period, EIA reported. "Non-OPEC oil production has been surprisingly strong in 2009, largely the result of higher-than-expected production from Russia," it said.
Russia produced more than 10 million b/d during August, setting a new post-Soviet era record, EIA said. It expects non-OPEC production to grow by about 250,000 b/d in 2010, with higher output from the FSU and the US offsetting falling production in Mexico and the North Sea.
OPEC production averaged 29 million b/d in the first three quarters, 2.4 million b/d lower year-to-year, EIA said. It expects OPEC members to raise output gradually in 2010 to an average 29.4 million b/d in response to higher demand.
EIA also expects OPEC's surplus production capacity to remain above 4 million b/d through the forecast period, compared with a 1998-2008 average of 2.8 million b/d.
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