The U.S. Energy Information Administration Tuesday slashed its forecasts for how much it sees world oil demand growing in 2014, while increasing its expectation for how supply will come from non-OPEC producers this year.
The agency reported in its July Short Term Energy Outlook that U.S. oil output in 2015 will likely average its highest level in 42 years, while also raising its forecast for U.S. and international oil prices.
U.S. crude oil production is expected to increase from an estimated 7.4 million barrels per day in 2013 to 8.5 million bpd in 2014 and 9.3 million bpd in 2015. "The 2015 forecast represents the highest annual average level of oil production since 1972," the EIA said.
The EIA expects that U.S. regular-grade gasoline retail prices will average $3.66 per gallon during the current summer driving season, compared to $3.62 in June's report.
The EIA also slightly raised its forecast for the average price of retail gasoline this year, $3.54 per gallon vs. $3.50 last month.
In line with this, the report forecast that Brent crude prices will average $109.55 a barrel in 2014, up from $107.82 in last month's outlook. It is then projected to fall to $104.92 per barrel in 2015, higher than the $101.92 per barrel forecast in June.
The average forecast for WTI crude prices was $100.98 vs. $98.67 in June, then down to $95.17 in 2015.
The EIA estimates world oil consumption will grow by 1.13 million bpd to 91.62 million bpd in 2014, a downgrade from the 1.31 million bpd growth rate projected last month. World oil demand is forecast to increase further by 1.46 million bpd to 93.08 million bpd in 2015 - a faster pace compared to June's expectation of +1.33 million bpd.
As usual, non-OECD nations - particularly China - account for nearly all of the demand growth. The EIA estimates that liquid fuels consumption in China will increase by 400,000 bpd in 2014 and then up by 430,000 bpd in 2015.
On the supply side most of the projected increase is expected to come from North America, although with a slower pace of growth in 2015.
Total non-OPEC supply in 2014 is forecast to increase by 1.74 million bpd to 55.84 million bpd, an upward revision vs. supply of 55.66 million bpd forecast in June, and then by +0.97 million bpd to almost 57 million bpd next year.
Meanwhile, OPEC is expected to supply 29.59 million bpd to the oil market this year, down from 29.8 million bpd forecast in June. The EIA outlook sees the demand for OPEC oil slipping further to 29.52 million bpd in 2015.
"The escalation of violence in northern Iraq that started in June has introduced significant uncertainty into the Iraq oil production outlook," the EIA said, and it does not expect Iraq oil output to exceed 3.3 million barrels per day this year or in 2015.
However, "EIA expects Saudi Arabia to maintain a higher production level through 2014 to offset the loss of Iraq's growth," the agency said.
"In 2015, Saudi Arabia's annual production is still projected to decline to accommodate growing output in non-OPEC countries, albeit to a lesser extent than previously expected," it added.
The EIA changed its estimate for average OPEC surplus capacity in 2014 to 2.04 million barrels per day from 2.2 million bpd, and then sees an increase to 2.68 million bpd in 2015 - a sharp departure from the 3.5 million bpd forecast last month.
"The reduction in surplus capacity from last month's STEO mainly reflects increased forecast production from Saudi Arabia," EIA said.
The 2014 natural gas consumption forecast was 72.4 billon cubic feet per day, essentially unchanged from 72.5 bcf in last month's report.
"In 2015, total natural gas consumption falls by 0.3 Bcf/d as a return to near-normal winter weather contributes to lower residential and commercial consumption," the EIA said.
The report said natural gas prices averaged $4.59 per MMBtu in June, little changed vs. May, and expects spot prices to remain in that vicinity until the start of the next winter heating season.
EIA expects the Henry Hub price will average of $4.77 per MMBtu in 2014, and $4.50 per MMBtu in 2015. The 2014 and 2015 forecasts are up from $.4.74 and $4.33, respectively, in June's report.
Source: MNI
