OPEC Crude Oil Production Seen Declining in 2013

Total crude oil production by the members of the Organization of the Petroleum Exporting Countries (OPEC) averaged 30.3 million barrels per day (bbl/d) in fourth-quarter 2012, down from 31.1 million bbl/d in the prior quarter. In the March Short-Term Energy Outlook (STEO), EIA projects that OPEC will cut crude oil production from an average of 30.9 million bbl/d for full-year 2012 to 30.3 million bbl/d in 2013 in response to expected non-OPEC supply growth. Total OPEC petroleum liquids production will not decline as much because of growth in OPEC's condensate and natural gas liquids. When non-crude liquids are included, total projected OPEC production declines from 36.4 million bbl/d in 2012 to 36.0 million bbl/d in 2013.

With liquids production in the United States projected to rise by 835,000 bbl/d in 2013, and Saudi Arabia continuing in its traditional role as the main swing producer among the OPEC countries, it is likely that total U.S. liquids production will exceed that of Saudi Arabia this year. However, as discussed in a recent article (see EIA's This Week in Petroleum December 19, 2012), the ordering of producers depends upon accounting conventions used to make the comparison. While both U.S. and Saudi production trends are closely watched by market analysts, any future crossing of production paths is more likely to fall into the category of an interesting factoid rather than a watershed event. Regardless of how much the United States is able to reduce its reliance on imported liquid fuels, it will not be insulated from price shocks that affect the global oil market. And Saudi Arabia will likely continue in its unique role as the only holder of significant spare oil production capacity among world oil producers.

The forecast reduction in production by OPEC member countries during 2013 suggests an increase in world surplus production capacity, a widely-watched oil market indicator. EIA estimates that OPEC surplus production capacity was about 2.8 million bbl/d in February, an increase of 0.8 million bbl/d over year-ago levels, but still 0.2 million bbl/d lower than the previous three-year average. Based on EIA projections, OPEC surplus capacity will average 2.9 million bbl/d in 2013 and 3.4 million bbl/d in 2014. In all cases, Saudi Arabia is the dominant holder of surplus capacity. These estimates do not include additional capacity that may be available in Iran but that is currently offline because of the effects of U.S. and European Union sanctions on Iran's ability to sell its oil.

While the sanctions on Iran have been an ongoing story, the death of Venezuelan President Hugo Chávez and the outcome of the ensuing succession process could have implications for that country's oil sector. For now, EIA is maintaining its Venezuelan production forecast on the assumption that current policies related to the oil sector are continued. For more information, see "Political risks focus attention on supply of Venezuelan oil to the United States."

EIA has lowered its expectations for oil production in Libya to reflect persistence of the technical problems and political pressures that have already curtailed output. Libya's precarious security environment creates downside production risk from the potential for additional disruptions due to attacks, strikes, or poorly maintained infrastructure.

In Iraq, payment disputes between Baghdad and the Kurdistan Regional Government are projected to lead to loss of output in the north that, at least partly, offsets increased crude oil exports from Iraq's southern fields. EIA, like many others, has frequently revised its expectations for Iraqi production growth downward because of ongoing political difficulties.

Since 2007, Angolan production increases have been followed by subsequent declines. Technical and maintenance problems have plagued some of Angola's deepwater fields for years, particularly the Greater Plutonio project, and will continue to limit Angola's crude oil production over the STEO forecast period. Nonetheless, EIA still anticipates Angolan crude oil output to gradually increase over the next two years as new deepwater production more than offsets chronic maintenance–related declines.

Gasoline and diesel fuel prices both fall again
The U.S. average retail price of regular gasoline decreased five cents to $3.71 per gallon, down 12 cents from last year at this time. Prices declined in all regions of the nation, with the largest decrease in the Midwest, where the price decreased nine cents to $3.62 per gallon. The East Coast price dropped four cents to $3.73 per gallon, and the Gulf Coast price is $3.54 per gallon, down three cents from last week. The West Coast price is down two cents to $4.05 per gallon, and the Rocky Mountain price is $3.47 per gallon, a penny less than last week.

The national average diesel fuel price decreased four cents to $4.09 per gallon, four cents lower than last year at this time. Prices decreased in all regions of the nation, with the East and West Coast prices dropping a nickel, to $4.12 per gallon and $4.23 per gallon, respectively. The Midwest and Rocky Mountain prices decreased to $4.04 per gallon and $4.01 per gallon, respectively, a decrease of four cents in each region. Rounding out the regions, the Gulf Coast price dropped three cents to $4.04 per gallon.

Propane inventories decline
U.S. propane stocks fell 2.7 million barrels to end at 43.0 million barrels last week, yet are 0.8 million barrels (1.9 percent) higher than the same period a year ago. Midwest inventories dropped by 1.6 million barrels, and Gulf Coast regional inventories declined by 1.0 million barrels. East Coast stocks dropped by 0.1 million barrels, and stocks in the Rocky Mountain/West Coast region also declined by 0.1 million barrels. Propylene non-fuel-use inventories represented 7.1 percent of total propane inventories.

Residential heating oil prices decrease while residential propane prices remain flat
Residential heating oil prices decreased during the period ending March 11, 2013. The average residential heating oil price fell by nearly 2 cents to $4.04 per gallon, almost 7 cents per gallon lower than the same time last year. Wholesale heating oil prices increased by 4 cents to $3.14 per gallon, 23 cents per gallon less than last year at this time.

The average residential propane price remained unchanged, holding at $2.49 per gallon for the fourth consecutive week, almost 38 cents per gallon lower than the same period last year. Wholesale propane prices decreased by less than a penny to remain at $0.97 per gallon for the week ending March 11, 2013, 35 cents per gallon lower than the March 12, 2012 price.

The last data collection for the 2012-2013 SHOPP season will be published next week on Wednesday, March 20, 2013.

Short Term Energy Outlook

Highlights

• This edition of the Short‐Term Energy Outlook is the first to include forecasts for 2013.

·         EIA expects the price of West Texas Intermediate (WTI) crude oil to average about $100 per barrel in 2012, $5 p er barrel higher than the average price last year.  For 2013, EIA expects WTI prices to continue to rise, reaching $106 per barrel in the fourth quarter of next year.  EIA’s forecast assumes that U.S. real gross domestic product (GDP) grows by 1.8 percent in 2012 and 2.5 percent in 2013, while world real GDP (weighted by oil consumption) grows by 2.9 percent and 3.8 percent in 2012 and 2013, respectively.
·         The forecast of average household heating expenditures for all heating fuels has been lowered from th e first forecast for the current winter published in the October 2011 Outlook, primarily as a result of the warm first half of this heating season.  Average household heating oil expenditures are now expected to increase by 4 percent this winter heating season (October 1 to March 31) compared with last winter.  In contrast, natural gas and propane expenditures are projected to decline by 7 percent and 1 percent, respectively, and electricity expenditures are 2 percent lower than last winter’s levels.
·         EIA expects regular‐grade motor gasoline retail prices to average $3.48 per gallon in 2012, 4 cents per gallon lower than last year, and $3.55 per gallon in 2013.  During the April through September peak driving season each year, prices are forecast to average about 5 cents per gallon higher than the annual average.  There is regional variation in the forecast, with average expected prices on the West Coast about 25 cents per gallon above the national average during the April through September period.

·         Natural gas working inventories continue to set new record highs and ended December 2011 at an estimated 3.5 trillion cubic feet (Tcf), about 12 percent above the same time last year.  EIA’s average 2012 Henry Hub natural gas spot price forecast is $3.53 per million British thermal units (MMBtu), a decline of almost $0.50 per MMBtu from the 2011 average spot price.  EIA expects that Henry Hub spot prices will average $4.14 per MMBtu in 2013.

                                      
http://www.eia.gov/forecasts/steo/

Contact:  Tancred Lidderdale      
tancred.lidderdale@eia.gov    phone: (202) 586-7321 

THIS WEEK IN PETROLEUM REPORT RELEASE – October 26, 2011

Brazil will be responsible for some of the world's largest increases in oil production in the coming decades.  Advances in seismic imaging have enabled the discovery of offshore "pre-salt" deposits of oil in Brazil's Campos and Santos Basins (Figure 1).  These pre-salt fields, so-called because they lie under massive layers of salt, are located 18,000 feet below the ocean floor under more than 6,000 feet of salt.  Brazil already produces 2.1 million barrels per day (bbl/d) of crude oil and lease condensate, yet just became a net exporter in 2008.  Pre-salt development, coupled with the ability to meet a large share of domestic demand with biofuels, is projected to transform the country into a major oil exporter.

Short-Term Energy Outlook October 12, 2011 Release

Highlights


 EIA projects average household heating expenditures for natural gas, propane, and heating oil will increase by 3 percent, 7 percent, and 8 percent, respectively, this winter (October 1 to March 31) compared with last winter, while electricity heating expenditures fall by less than 1 percent. Average expenditures for households that heat with oil are forecast to be higher than in any previous winter.

 This forecast reflects higher prices for natural gas, propane, and heating oil, and slightly milder weather than last winter in much of the Nation contributing to lower consumption in many areas (see EIA Short Term Energy and Winter Fuels Outlook slideshow).

 According to the National Oceanic and Atmospheric Administration’s (NOAA) most recent projection of heating degree-days, the lower-48 States are forecast to be 2 percent warmer during the October through March winter heating season compared with last winter. However, heating degree-day projections vary widely among regions, with the West projected to be about 3 percent colder than last winter, and the South projected to be about 5 percent warmer.

 Forecast U.S. real gross domestic product (GDP) grows by 1.5 percent this year and by 1.8 percent next year, slightly lower than in last month’s Outlook. World oil-consumption-weighted real GDP grows by 3.0 percent and 3.5 percent in 2011 and 2012, respectively, compared with 3.1 percent and 3.8 percent in the last Outlook. EIA expects the U.S. average refiner acquisition cost of crude oil to average $99 per barrel in 2011 and $98 per barrel in 2012, compared with $100 per barrel and $103 per barrel, respectively, in the previous Outlook.

 Natural gas working inventories ended September 2011 at 3.4 trillion cubic feet (Tcf), about 2.6 percent, or 91 billion cubic feet (Bcf), below the 2010 end-of-September level. EIA expects that working natural gas inventories will approach last year’s high levels by the end the injection season. The projected Henry Hub natural gas spot price averages $4.15 per million British thermal units (MMBtu) in 2011, $0.24 per MMBtu lower than the 2010 average. EIA expects the rate of growth in domestic natural gas production to slow in 2012, with the Henry Hub spot price averaging $4.32 per MMBtu.

Contact:

Tancred Lidderdale
tancred.lidderdale@eia.gov
phone: (202) 586-7321

Short-Term Energy Outlook

July 12, 2011 Release

Highlights

· World crude oil prices initially fell following the June 23 announcement by the International Energy Agency (IEA) that its member countries would release up to 60 million barrels from strategic reserves but then rose above the pre-announcement levels in late June and early July. Attributing observed price changes since June 23 to the IEA announcement is difficult because other drivers, including changing expectations of world economic and crude oil consumption growth, uncertainty over oil supply disruptions, estimates of OPEC spare production capacity, and other physical and financial factors are continually affecting oil prices. Although the IEA release will provide some additional supply, EIA expects oil markets to tighten through 2012. Given projected world oil demand growth and slowing growth in supply from countries that are not members of the Organization of the Petroleum Exporting Countries (OPEC), the projected U.S. average refiner acquisition cost of crude oil rises from $102 per barrel in 2011 to $108 per barrel in 2012, about $1 per barrel below last month’s Outlook.

· The regular-grade gasoline monthly average retail price fell from $3.91 per gallon in May to $3.68 per gallon in June, reflecting the decline in crude oil prices from their April peak and a recovery from unexpected refinery outages and Mississippi River flooding. EIA expects regular-grade gasoline prices will average $3.62 per gallon and $3.51 per gallon over the third and fourth quarters of 2011, respectively.

· Natural gas working inventories ended June 2011 at 2.5 trillion cubic feet (Tcf), about 8 percent, or 214 billion cubic feet (Bcf), below the 2010 end-of-June level. EIA expects that working gas inventories will build strongly during the summer and approach record-high levels in the second half of 2011. The projected Henry Hub natural gas spot price averages $4.27 per million British thermal units (MMBtu) in 2011, $0.12 per MMBtu lower than the 2010 average. EIA expects the natural gas market to begin tightening in 2012, with the Henry Hub spot price increasing to an average of $4.54 per MMBtu.

http://www.eia.doe.gov/emeu/steo/pub/contents.html

Chinese Oil Demand 101: The Role of Electricity

Despite recent decreases in crude oil prices and concern over the pace of economic growth in Organisation for Economic Co-operation and Development (OECD) countries, supply and demand fundamentals underlying the oil market remain strong. Far from reducing their expectations of global oil demand growth for 2011, the U.S. Energy Information Administration's (EIA) Short-Term Energy Outlook and other forecasters have recently raised their demand projections. EIA is currently projecting global oil demand to average 88.4 million barrels per day (bbl/d) in 2011, 1.7 million bbl/d higher than in 2010. Of that increment, China alone is expected to account for some 700 thousand bbl/d. Why such strong growth, and why the upward revisions, given that most forecasters are becoming, if anything, slightly less optimistic about China's economy?

U.S. Oil Import Dependence: declining no matter how you measure it

U.S. oil import dependence is an issue perhaps as hotly debated as it is loosely defined. As discussed in a This Week in Petroleum article published in 2008, there is more than one way of measuring it. Different methods of calculation yield different results. But whichever way it is defined, U.S. dependence on imported oil has dramatically declined since peaking in 2005, continuing a trend that was beginning to emerge the last time This Week In Petroleum examined the issue. By the broadest measure, U.S. dependence on imported oil fell below the 50 percent mark last year for the first time since 1997. To put it succinctly, discrepancies in the way dependence is assessed arise because oil, for the most part, is imported as crude oil, but is consumed as refined products, of which crude oil is the main but not the only input - hence the need to clarify whether dependence is assessed at the output/consumption level or at the input level, and in the latter case what range of inputs is included as a basis for comparison. Two of the most common and straightforward definitions measure dependence as the ratio of total net oil imports (including crude and products) to total product consumption, or much more narrowly as the ratio of net imported crude oil to net crude oil inputs to refineries.