Global Petroleum and Other Liquids
EIA projects world petroleum and other liquids supply to increase by 1.3 million barrels per day (bbl/d) in both 2014 and 2015, with most of the growth coming from countries outside of the Organization of the Petroleum Exporting Countries (OPEC). The Americas, in particular the United States, Canada, and Brazil, will account for much of this growth. Projected world liquid fuels consumption grows by an annual average of 1.2 million bbl/d in 2014 and 1.4 million bbl/d in 2015. Countries outside the Organization for Economic Cooperation and Development (OECD), notably China, drive expected consumption growth. Non-OPEC supply growth contributes to an increase in global surplus crude oil production capacity from an average of 2.1 million bbl/d in 2013 to 3.9 million bbl/d in 2015.
Global Petroleum and Other Liquids Consumption
EIA estimates that global consumption grew by 1.2 million bbl/d in 2013, averaging 90.4 million bbl/d for the year. EIA expects global consumption to grow 1.2 million bbl/d in 2014 and 1.4 million bbl/d in 2015. Projected global oil-consumption-weighted real GDP, which increased by an estimated 2.3% in 2013, grows by 3.1% and 3.5% in 2014 and 2015, respectively.
Non-OECD countries as a group are expected to account for all of the consumption growth in 2014 and nearly all of the growth in 2015. China is the leading contributor to projected global consumption growth, with consumption increasing by 400,000 bbl/d in 2014 and 430,000 bbl/d in 2015. However, China's economic and oil consumption growth rates have moderated compared with rates before 2012, when annual GDP growth exceeded 9% and oil consumption growth averaged 700,000 bbl/d from 2009 through 2012.
EIA expects lower OECD consumption in 2014, led by projected consumption declines in both Japan and Europe. EIA expects Japan's oil consumption to fall by an annual average of 150,000 bbl/d in 2014 and 2015, as the country continues to increase natural gas consumption in the electricity sector and returns some nuclear power plants to service. EIA projects that OECD Europe's consumption, which fell by 60,000 bbl/d in 2013, will decline by another 60,000 bbl/d in 2014 and then remain mostly flat in 2015. U.S. liquids consumption, which increased by 400,000 bbl/d in 2013, is expected to remain flat in 2014 and then increase by 100,000 bbl/d in 2015.
EIA estimates that non-OPEC liquids production grew by 1.3 million bbl/d in 2013, averaging 54.0 million bbl/d for the year. EIA expects non-OPEC liquids production to grow by 1.8 million bbl/d in 2014 and 1.5 million bbl/d in 2015. EIA forecasts production from the United States and Canada to grow by a combined annual average of 1.3 million bbl/d in 2014 and 1.2 million bbl/d in 2015. Brazil's production is expected to increase by an annual average of 0.15 million bbl/d over the next two years, attributable to new deepwater fields. EIA estimates that Asia and Oceania's production will rise by an annual average of 0.18 million bbl/d over the forecast period, led by China.
Unplanned supply disruptions among non-OPEC producers averaged 0.7 million bbl/d in February 2014, unchanged from the previous month. South Sudan, Syria, and Yemen account for about 80% of total non-OPEC supply disruptions. EIA does not assume a disruption to oil supply or demand as a result of ongoing events in Ukraine.
EIA estimates that OPEC crude oil production averaged 30.0 million bbl/d in 2013, a decline of 0.9 million bbl/d from the previous year, primarily reflecting increased outages in Libya, Nigeria, and Iraq, and strong non-OPEC supply growth. EIA expects OPEC crude oil production to fall by 0.5 million bbl/d and 0.3 million bbl/d in 2014 and 2015, respectively, as some OPEC countries, led by Saudi Arabia, reduce production to accommodate the non-OPEC supply growth in 2014. In recent months, EIA revised upward historic data for OPEC noncrude liquids supply. Projected OPEC noncrude oil liquids production, which averaged an estimated 6.3 million bbl/d in 2013, increases to an average of 6.5 million bbl/d in 2015.
Unplanned crude oil supply disruptions among OPEC producers averaged more than 2.3 million bbl/d in February 2014, almost 0.1 million bbl/d higher than the previous month. Libya continues to experience swings in its production, contributing to changes in the OPEC disruption estimate.
EIA expects that OPEC surplus capacity, which is concentrated in Saudi Arabia, will average 2.6 million bbl/d in 2014 and 3.9 million bbl/d in 2015. This build in surplus capacity reflects production cutbacks by some OPEC members adjusting for the higher supply from non-OPEC producers. These estimates do not include additional capacity that may be available in Iran but is currently offline because of the effects of U.S. and European Union sanctions on Iran's oil sector.
OECD Petroleum Inventories
EIA estimates that OECD commercial oil inventories totaled 2.59 billion barrels by the end of 2013, equivalent to roughly 56 days of consumption in that region. Projected OECD oil inventories rise to 2.61 billion barrels at the end of 2014 and 2.62 billion barrels at the end of 2015.
Crude Oil Prices
Brent crude oil spot prices in February averaged between $108/bbl and $112/bbl for the eighth consecutive month. EIA expects the Brent crude oil price to weaken as non-OPEC supply growth exceeds growth in world consumption. The Brent crude oil price is projected to average $105/bbl and $101/bbl in 2014 and 2015, respectively.
The WTI crude oil spot price, which fell to $95/bbl in January 2014, increased to an average of $101/bbl in February as a result of strong Midwestern refinery runs after cold-weather-related disruptions in January. EIA expects that WTI crude oil prices will average $95/bbl in 2014, $2/bbl higher than last month's STEO, and $90/bbl during 2015. The discount of WTI crude oil to Brent crude oil averaged $8/bbl in February after averaging more than $13/bbl over the previous three months. EIA expects the discount of WTI crude oil to Brent crude oil to average $10/bbl in 2014 and $11/bbl in 2015, reflecting the economics of transporting and processing the growing production of light sweet crude oil in U.S. and Canadian refineries.
Energy price forecasts are highly uncertain, and the current values of futures and options contracts suggest that prices could differ significantly from the forecast levels (Market Prices and Uncertainty Report). WTI futures contracts for June 2014 delivery, traded during the five-day period ending March 6, 2014, averaged $101/bbl. Implied volatility averaged 18%, establishing the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in June 2014 at $87/bbl and $118/bbl, respectively. Last year at this time, WTI for June 2013 delivery averaged $92/bbl and implied volatility averaged 22%. The corresponding lower and upper limits of the 95% confidence interval were $76/bbl and $111/bbl.