EIA: Global oil demand to rise by 1.5 million b/d in 2011

Worldwide oil demand will increase by 1.5 million b/d in 2011 and by 1.6 million b/d in 2012, with continued tightening of global oil markets over the next 2 years, EIA said in its latest Short-Term Energy Outlook (STEO).

By OGJ editors
-- Worldwide oil demand will increase by 1.5 million b/d in 2011 and by 1.6 million b/d in 2012, with continued tightening of global oil markets over the next 2 years, EIA said in its latest Short-Term Energy Outlook (STEO). In its previous STEO, released a month ago, EIA forecast this year’s global oil demand growth at 1.4 million b/d.

Developing countries outside the Organization for Economic Cooperation and Development will account for almost all of the growth in consumption over the next 2 years, with the largest contributions coming from China, Brazil, and the Middle East. Among the OECD regions, EIA expects that only North America will consume more oil over the next 2 years, as demand declines in OECD Europe and Asia.

In the US, EIA expects oil demand to increase by 140,000 b/d in 2011, up 0.8% from last year, and by another 170,000 bbl/d in 2012 to average 19.5 million b/d. Motor gasoline and distillate fuel will account for much of the growth in consumption, the report said.

Oil supply
EIA forecasts that total oil and liquid fuels production from nonmembers of the Organization of Petroleum Exporting Countries will increase by 310,000 b/d this year, then decline slightly in 2012. Increases this year in non-OPEC oil production will be concentrated in a few countries, particularly in China and Brazil, where EIA expects each to post average production growth of 170,000 b/d.

Projected US oil production will decline by 50,000 b/d in 2011 and by a further 190,000 b/d in 2012. EIA expects Canadian crude production growth to average 170,000 b/d next year, while China and Brazil grow next year by 130,000 b/d and 110,000 b/d, respectively.

Mexico's oil production will decline by about 210,000 b/d in 2011, followed by a further dip of 80,000 b/d in 2012. Production from the North Sea will fall by 220,000 b/d this year and by 160,000 b/d in 2012, according to the STEO.

EIA forecasts that OPEC crude production will increase by 400,000 b/d in 2011, followed by a further increase of 1.2 million b/d in 2012 in response to the increase in global demand for oil and limited growth in production in non-OPEC countries.

OPEC natural gas liquids production will increase by 700,000 b/d this year and by 400,000 b/d in 2012, and EIA expects that OPEC surplus production capacity will remain above 4 million b/d during the next 2 years.

Onshore commercial oil inventories in the OECD countries remained high last year, but reports indicate that volumes of floating oil in storage fell sharply, EIA said. Now that floating storage has been reduced, EIA expects that OECD onshore inventories will decline over the forecast period.

Projected OECD stocks will fall by about 55 million bbl in 2011, followed by an additional 60 million bbl decline in 2012. The number of days of supply will fall to 55 days from 57 days between December 2010 and the end of 2012, near the middle of the previous 5-year range, EIA said.

Oil price outlook
EIA expects the price of WTI crude oil to average about $93/bbl in 2011, up $14/bbl from last year. For 2012, EIA projects that WTI prices will continue to rise, averaging $98/bbl.

EIA’s forecast assumes that US real gross domestic product (GDP) will grow by 3% in 2011 and by 2.8% next year, while global GDP will grow by 3.9% and 4%, respectively, in 2011 and 2012.

“There are many significant uncertainties that could push oil prices higher or lower than current expectations. Among the uncertainties are decisions by key OPEC member countries regarding their production response to the global recovery in oil demand; the rate of economic recovery, both domestically and globally; fiscal issues facing national and subnational governments; and China’s efforts to address concerns regarding its growth and inflation rates,” the STEO said.

“In addition, even though Egypt is not a major supplier of crude oil or natural gas to world markets, the recent unrest in that country raises the concern that unrest could spread to other countries in the region with a larger role in supplying world energy markets or that key transit routes for energy and other goods could be disrupted,” EIA said.

EIA expects regular-grade motor gasoline retail prices to average $3.15/gal this year, up 37¢/gal from 2010, and to average $3.30/gal in 2012.

And EIA forecasts that average household expenditures for space-heating fuels will total $991 during this 2010-11 winter season, $24 higher than a year earlier. EIA projects higher expenditures for heating oil and propane, flat expenditures for electricity, but lower expenditures for natural gas. A forecast of milder weather in the South and the West compared with the 2009-10 winter leads to lower fuel consumption in those areas, EIA said.

Natural gas forecast
EIA expects that 2011 US natural gas consumption will remain flat from 2010 but grow by 1% next year to 66.8 bcfd.

An increase in gas demand by electric power producers of 2.9% and a 1.2% increase by industrial users will be partially offset by slight declines in residential and commercial consumption, EIA said, but electric power and industrial demand next year will grow by 2.9% and 1.2%, respectively.

Total marketed natural gas production grew strongly throughout 2010, with 4.4% annual growth. Production in 2011 will slow considerably to just 0.8 %, EIA forecasts, as an increase of 1 bcfd in the Lower-48 states is partially offset by a decline of 0.4 bcfd in the Gulf of Mexico.

Increasing consumption, especially in the electric power segment, will contribute to higher prices and more economic incentive for producers to resume drilling, according to the STEO.

Total US gas production will increase 1.1% in 2012, as Lower-48 production is expected to increase throughout 2012 and federal Gulf of Mexico production is forecast to decline by 0.4% in 2012.

The Henry Hub spot price averaged $4.49/MMbtu in January, up 24¢/MMbtu from the previous month. EIA forecasts that the Henry Hub spot price will average $4.16/MMbtu in 2011, down 22¢/MMbtu from the 2010 average.

EIA said it expects the gas market to begin to tighten in 2012, with the Henry Hub spot price increasing to an average of $4.58/MMbtu for the year.

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