Global petroleum consumption

The US Energy Information Administration (EIA) predicts that global liquid fuels supply will continue to outpace consumption, resulting in an average stock build of 0.4 million bpd in 2015. Stock builds are expected to be concentrated in the first half of the year, averaging 0.7 million bpd during this period. EIA forecasts global liquid fuels supply to average 92.8 million bpd in 2015, 0.2 million bpd lower than in last month’s STEO. The 2015 global demand forecast was also revised downward by 0.2 million bpd to an average of 92.3 million bpd, based on weaker global economic growth prospects for next year.

Consistent with OPEC’s announcement, Saudi Arabia has indicated its intention to maintain its export market share rather than cut production to keep prices higher. In the past, Saudi Arabia often played the role of the swing producer, temporarily cutting its production to accommodate supply growth elsewhere or weaker global demand, or increasing its output level to make up for supply shortfall. Saudi Arabia’s production is projected to decline in 2015 compared with this year, but by a smaller amount than previously expected. EIA projects that Saudi Arabia will cut production below its current level of 9.6 million bpd amid high non-OPEC supply growth, but maintain output above 9.0 million bpd through 2015.

Global petroleum and other liquids

EIA estimates that global consumption grew by 1.3 million bpd in 2013, averaging 90.5 million bpd for the year. EIA expects global consumption to grow by 1.0 million bpd in 2014 and 0.9 million bpd in 2015. Projected global oil consumption weighted real GDP, which increased by an estimated 2.7% in 2013, is projected to grow by 2.7% and 2.9% in 2014 and 2015, respectively. Compared with last month’s forecast, global consumption was revised downward by 0.2 million bpd in 2015, based on a 0.3% reduction to forecast global oil consumption weighted real GDP growth. In the short term, the income elasticity of global demand is greater than the price elasticity of global demand. Thus, the negative impact of lower forecast economic growth on demand outweighs the positive impact of lower oil prices.

Consumption outside of the OECD is projected to grow by 1.2 million bpd in 2014 and 0.9 million bpd in 2015. China is the leading contributor to projected global consumption growth, with consumption increasing by an annual average of 0.36 million bpd in 2014 and 2015.

EIA expects a 0.2 million bpd decline in OECD consumption in 2014. Japan and Europe are expected to account for much of the projected OECD consumption decline. EIA expects Japan’s consumption, which fell by 0.16 million bpd in 2013, to decline by an additional 0.16 million bpd in 2014 and 0.14 million bpd in 2015. Japan is expected to use less fuel oil in the electricity sector as the country returns some nuclear power plants to service in 2015 and increases the use of natural gas and coal to generate electricity. EIA forecasts that OECD Europe’s consumption, which fell by 0.15 million bpd in 2013, declines by an additional 0.12 million bpd in 2014 and 0.14 million bpd in 2015. US consumption, which increased by 0.47 million bpd in 2013, is expected to remain flat in 2014 and then increase by 0.14 million bpd in 2015.

Non-OPEC petroleum and other liquids

EIA estimates that non-OPEC production grew by 1.4 million bpd in 2013, averaging 54.1 million bpd for the year. EIA expects non-OPEC production to grow by 1.9 million bpd in 2014 and 0.8 million bpd in 2015, with the US as the leading contributor. Non-OPEC supply is forecast to increase by 1.6 million bpd in 2014 and 1.0 million bpd in 2015. EIA estimated that Eurasia’s production will rise by an annual average of 0.05 million bpd in 2014 and decline by 0.09 million bpd in 2015, reflecting declines in Russia and Azerbaijan.

Unplanned supply disruptions among non-OPEC producers averaged slightly lower than 0.6 million bpd in November, virtually unchanged from the previous month. South Sudan, Syria, and Yemen accounted for more than 90% of total non-OPEC supply disruptions.

OPEC petroleum and other liquids supply

EIA estimates that OPEC and other crude oil production averaged 29.9 million bpd in 2013, a decline of almost 1.0 million bpd from the previous year, primarily reflecting increased outages in Libya, Nigeria, Iran, and Iraq, along with strong non-OPEC supply growth. EIA expects OPEC crude oil production to fall by 0.1 million bpd in 2014 and by 0.2 million bpd in 2015. Previously projected OPEC crude oil production declines were reduced based on a reassessment of Saudi Arabia’s willingness to cut production.

The Iraqi government in Baghdad reached a deal on oil exports and revenue with the Kurdistan Regional Government (KRG) in early December 2014, which could facilitate increased production and exports from northern fields controlled by KRG and by Baghdad. Notwithstanding this agreement, the threat of ISIL on northern production and exports still looms. As a result, Iraq is a major wildcard to the 2015 world oil production forecast. EIA projects that Iraq’s production will grow by 0.2 million bpd next year. Actual production growth has the potential to exceed this forecast if Baghdad and KRG follow through on the deal, and if ISIL does not substantially affect production.

Unplanned crude oil supply disruptions among OPEC producers averaged 2.7 million bpd in November 2014, an increase of nearly 0.6 million bpd because of new production outages in Libya and continued outages in the Neutral Zone shared by Kuwait and Saudi Arabia. Intermittent supply outages in Libya will most likely persist as the country faces political instability and a deteriorated security environment. As a result, EIA does not expect Libya’s oil production to recover to its pre-blockade level of 1.4 million bpd over the forecast period.

EIA expects OPEC surplus crude oil production capacity, which is concentrated in Saudi Arabia, to average 2.1 million bpd in 2014 and 2.5 million bpd in 2015. The estimates do not include additional capacity that may be available in Iran but is offline because of the effects of US and EU sanctions on Iran’s ability to sell its oil.

Adapted from a report by Emma McAleavey.

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