Consumption. World oil consumption rose by 1.2 million barrels per day (bbl/d) in the second quarter of 2007 compared with year-earlier levels. China, the Middle East, the United States, and India accounted for most of the increase in oil consumption. EIA projects that world oil consumption will increase at a year-over-year rate of 1.8 million bbl/d during the second half of 2007 (World Oil Consumption). Recent volatility in financial markets contributes to uncertainty in the consumption projections, suggesting possible future downward revisions if the situation leads to slower economic growth than currently expected.
Non-OPEC Supply. Non-OPEC oil production is projected to grow by about 600,000 bbl/d during 2007 compared with year-earlier levels, a reduction of roughly 100,000 bbl/d from last month’s Outlook (Non-OPEC Oil Production Growth). A downward revision of 51,000 bbl/d in Mexico’s 2007 oil production is a principal cause of this change. In 2008, EIA estimates that non-OPEC petroleum production will grow by about 1 million bbl/d. The 2008 forecast is about 100,000 bbl/d lower than the last assessment due to a downward revision in projected U.S. ethanol and conventional oil output.
OPEC Supply. Announced maintenance at fields in the United Arab Emirates has lowered EIA’s projection for OPEC crude oil production in the fourth quarter by 100,000 bbl/d from last month’s Outlook to 30.9 million bbl/d. In 2008 EIA expects that OPEC will increase production slowly, to an average of 31.4 million bbl/d, in order to manage inventories and maintain prices. The economic uncertainty and risks to oil demand brought on by the turmoil in financial markets will likely reinforce OPEC’s cautious approach to production-target decision-making.
Despite expected increases in production capacity by several OPEC members, the expected gains in demand for OPEC oil will likely keep surplus capacity in the 2-to-3 million bbl/d range through 2008. Most of the surplus will remain concentrated in Saudi Arabia, leaving Riyadh with the flexibility to play a key role in influencing oil market developments. The modest level of worldwide surplus capacity makes the market vulnerable to unexpected supply disruptions.
Inventories. At the end of June 2007, Organization for Economic Cooperation and Development (OECD) inventories stood at 2.66 billion barrels, near the high end of the 5-year range. EIA’s projections of world oil supply and demand indicate that OECD inventories may register a counter-seasonal stock draw in the third quarter. Inventories are expected to decline at a faster-than-average rate in the fourth quarter, leaving inventories at the low end of the last 5-year range through the rest of the forecast period (Days of Supply of OECD Commercial Oil Stocks).
Source: EIA Short Term Energy Outlook