Global Petroleum Overview. WTI oil prices hovered in the $67-to-$74-per-barrel range in August as expectations of an economic recovery and higher oil consumption in the future were weighed against weak current demand and high inventories. As long as oil prices remain in their current range, EIA expects the Organization of the Petroleum Exporting Countries (OPEC) to maintain its existing production targets.

Global Petroleum Consumption. Preliminary data indicate that global oil consumption declined by 3 million barrels per day (bbl/d) in the second quarter of 2009 compared with year-earlier levels. Members of the Organization for Economic Cooperation and Development (OECD) accounted for most of the decline; total non-OECD consumption was virtually unchanged. The current macroeconomic outlook assumes that the world economy begins to recover at the end of this year, led by non-OECD Asia. As a result, EIA expects world oil consumption to grow in the fourth quarter of 2009 compared with year-earlier levels, the first such growth in 5 quarters. Projected world oil consumption grows by 0.9 million bbl/d in 2010, with relatively strong growth in non-OECD countries being partially offset by a slight decline in OECD consumption (World Liquid Fuels Consumption Chart).

Non-OPEC Supply. Total non-OPEC supply averaged 50.1 million bbl/d in the second quarter of 2009, about 0.3 million bbl/d higher than in the second quarter of 2008. The largest amount of growth came from Central and South America (0.3 million bbl/d) and the Former Soviet Union (0.3 million bbl/d), which was offset by a 0.3 million bbl/d decline in Europe. Over the forecast period, higher output from Brazil, the United States, Azerbaijan, Kazakhstan, and Canada offsets falling production in Mexico and the North Sea (Non-OPEC Crude Oil and Liquid Fuels Production Growth Chart).

OPEC Supply. OPEC crude oil production was 28.7 million bbl/d in the second quarter of 2009, similar to first quarter levels, but down 3 million bbl/d from peak production in the third quarter of 2008. The combination of higher prices and OPEC's historical tendency for weaker compliance with production targets over time (see This Week in Petroleum, August 12, 2009) suggests that OPEC crude oil production could rise over the remainder of the year, unless prices fall sharply from current levels. Projected OPEC crude oil production climbs to 29.3 million bbl/d in the second half of 2009, then averages 28.9 million bbl/d in 2010.

Global Petroleum Inventories. Based on preliminary data, OECD commercial oil inventories stood at 2.74 billion barrels at the end of the second quarter of 2009. At 61 days of forward cover, OECD commercial inventories were well above average levels for that time of year (Days of Supply of OECD Commercial Stocks Chart). EIA expects OECD oil inventories to remain at above-average levels throughout the forecast period because of weakness in global oil consumption and continuing contango in the futures market, i.e., relatively high future prices compared with current prices.

Crude Oil Prices. Equity-market and exchange-rate expectations continue to be cited by market analysts as proximate causes of oil-price behavior, in addition to changing expectations of global oil consumption growth. EIA projects that WTI crude oil prices will average $69 per barrel in the second half of 2009, $19 per barrel lower than in the second half of 2008 (Crude Oil Prices Chart). This projection is largely unchanged from last month's Outlook and reflects the view that an expected economic upturn will restore oil demand growth and gradually work off the surplus oil inventories. Although a consensus seems to be forming that the global economic downturn may have bottomed out, there still remains considerable uncertainty regarding the timing and pattern of any economic recovery.

Source: EIA