Coco
Seasoned Expediter
Short-Term Energy Outlook
February 10, 2009 Release
Highlights
U.S. real gross domestic product (GDP) is expected to decline by 2.7 percent in 2009, triggering decreases in domestic energy consumption for all major fuels. Economic recovery is projected to begin in 2010, with 2.2 percent year-over-year growth in GDP. Accompanying the projected economic recovery should be a mild rebound in energy consumption for all the major fuels in 2010.
Over the past 6 months, the monthly average price of West Texas Intermediate (WTI) crude oil fell from $133 per barrel in July to $41 in December and January. WTI prices are projected to average $43 per barrel in 2009 and $55 in 2010, unchanged from last month’s Outlook.
The U.S. price for regular gasoline averaged $1.69 per gallon in December 2008, the lowest monthly average since February 2004 and down nearly $2.40 per gallon from the monthly peak seen last July. Gasoline prices have been slowly increasing over the last 6 weeks as crude oil prices have stabilized and refiner margins have recovered from their recent near-historic lows. Retail gasoline prices are projected to average $1.95 per gallon in 2009 and $2.19 per gallon in 2010.
The U.S. economic downturn is also contributing to a decline in natural gas consumption, particularly in the industrial sector, which has led to lower natural gas prices. The Henry Hub natural gas spot price is projected to decline from an average of $9.13 per thousand cubic feet (Mcf) in 2008 to about $5 per Mcf in 2009, but then increase in 2010 to an average of almost $6 per Mcf.
Global Petroleum
Overview. The worsening global economy and a weak oil consumption outlook are keeping the world oil market well supplied, despite two downward revisions in production targets by the Organization of the Petroleum Exporting Countries (OPEC) within the past few months. Lower global oil demand and rising surplus production capacity through at least mid-year 2009 reduce the possibility for a strong and sustained rebound in oil prices over that period. OPEC is scheduled to meet in Vienna on March 15, which could lead to another production cut to mitigate some of the slack in the world oil market. However, near-month oil prices will likely be driven primarily by the global economy. Global real gross domestic product (GDP, weighted according to shares of world oil consumption) is assumed to decline by 0.1 percent in 2009 and rise by 3.0 percent in 2010, versus last month’s assessment of 0.6-percent growth in real GDP in 2009 and 3.0-percent growth in 2010.
Consumption. World oil consumption is projected to fall by 1.2 million bbl/d in 2009, representing an additional decline of 400,000 bbl/d from last month’s Outlook. World oil consumption is expected to rebound in 2010, growing by more than 1.2 million bbl/d, due to an expected recovery in the global economy. Oil consumption growth over the next 2 years is concentrated in countries outside of the Organization for Economic Cooperation and Development (OECD), particularly China, the Middle East, and Latin America, offsetting projected declines in OECD oil consumption. If the world economy recovers sooner than EIA now anticipates, oil consumption could be higher than expected, putting upward pressure on oil prices.
Non-OPEC Supply. Non-OPEC oil supply is expected to grow by 150,000 bbl/d in 2009 and 130,000 bbl/d in 2010. The expected growth in non-OPEC supply over the next 2 years comes in stark contrast to the 330,000-bbl/d decline seen in 2008, which was the result of longer-than-expected delays in key projects, larger-than-expected decline rates in mature basins, and supply disruptions in the Gulf of Mexico and Central Asia. The largest sources of growth over the forecast period are the United States, Brazil, and Azerbaijan, offset by large declines in production in Mexico, the North Sea, and Russia. The expected decline in Russian output in 2009 (-160,000 bbl/d) is especially noteworthy. Russian oil production grew by 3 million bbl/d from 2000 through 2007, representing 75 percent of total non-OPEC oil production growth over that period.
There are downside risks to the outlook for non-OPEC supply, as additional project delays are certainly possible given the financial crisis and the current price environment. Sustained lower oil prices bring into doubt the viability of some high‐cost non‐OPEC projects, especially those utilizing nonconventional technology or those seeking to exploit frontier oil basins. The credit crunch associated with the global economic crisis can also make it difficult to acquire financing for new projects or even to finance the investment required to prevent accelerated declines at producing fields. EIA's forecast reflects an attempt to account for some of these potential delays.
OPEC Supply. OPEC producers are cutting crude production targets in response to lower prices and eroding consumption. Estimated OPEC crude oil production fell by 1 million bbl/d during the fourth quarter of 2008, reaching 30.7 million bbl/d. OPEC crude oil production is expected to fall by an additional 1.6 million bbl/d in the first quarter of 2009 to 29.1 million bbl/d, the lowest level in 5 years, largely resulting from lower production in Saudi Arabia. The decline of 2.6 million bbl/d over this period represents nearly two-thirds of the 4.2-million-bbl/d cut in OPEC’s production target announced at its December meeting. For the year, OPEC crude oil production is expected to average 29.4 million bbl/d, then rise to 30.1 million bbl/d in 2010. In addition, EIA expects that OPEC production of non‐crude liquids will rise substantially next year, growing by 660,000 bbl/d in 2009 and by 870,000 bbl/d in 2010, due to increasing condensate and natural gas production.
The combination of lower demand for OPEC crude oil, increasing production of non-crude liquids, and the capacity expansions expected in several OPEC countries means that surplus production capacity could increase dramatically over the next 2 years. OPEC surplus production capacity could average 4.3 million bbl/d in 2009, eventually exceeding 5 million bbl/d by the end of 2010. By comparison, OPEC surplus production capacity ranged from 1 to 2 million bbl/d over the past 5 years. The lack of surplus production capacity was a crucial factor during the run-up in oil prices through the first half of 2008. If OPEC does hold 4 to 5 million bbl/d of surplus production capacity over the next 2 years, this could act to cushion the world oil market and help mitigate the price effect of perceived or actual supply disruptions.
Inventories. Preliminary data indicate that OECD commercial inventories stood at 2.58 billion barrels at the end of 2008, equivalent to 52 days of forward cover, above average levels for that time of year. Measured as days of forward cover, OECD commercial inventories are projected to remain above average levels through the end of 2010. High crude inventories in some markets, along with a growing use of floating storage, are signs that the oil market is well supplied. Along with ample OPEC surplus production capacity, high commercial inventories should help mitigate any strong upward price pressures.
U.S. Petroleum
Consumption. Total petroleum products consumption in 2008 declined by almost 1.2 million bbl/d, or 5.8 percent, from the 2007 average, the largest annual decline since 1980. The major factors behind the fall in consumption were a rapid rise in retail prices to record levels during the first half of 2008 followed by a weakening economy in the second half. Motor gasoline consumption in 2008 declined by 320,000 bbl/d, or 3.4 percent. Despite the cold weather that gripped much of the Lower-48 States in December, distillate fuel consumption in 2008 fell by 5.4 percent from the previous year as a result of precipitous declines in transportation consumption of diesel fuel. Major reductions in airline capacity during the fourth quarter contributed to the 100,000-bbl/d, or 6.2-percent, drop in jet fuel consumption. Total petroleum products consumption in 2009 is projected to fall by a further 460,000 bbl/d, or 2.4 percent, because of continued economic weakness. Consumption of both motor gasoline and distillate fuel are projected to decline by about 100,000 bbl/d each. Jet fuel is forecast to fall by a further 60,000 bbl/d. The expected economic recovery in 2010 is projected to boost total petroleum products consumption by 220,000 bbl/d, or 1.1 percent.
Production. In 2008, domestic crude oil production averaged 4.95 million bbl/d, down by 110,000 bbl/d from 2007. However, in 2009, domestic output is projected to increase by about 400,000 bbl/d to an average of 5.35 million bbl/d. This would be the first increase in production since 1991. Output is projected to rise by a further 130,000 bbl/d in 2010. Contributing to the increases in output are the Gulf of Mexico Thunder Horse platform, which is coming on stream now, and the Tahiti platform, expected to come on stream later this year.
Prices. WTI prices averaged almost $100 per barrel in 2008, with daily spot prices ranging from almost $150 per barrel in early July to about $30 per barrel towards the end of the year. Under current economic and world crude oil supply assumptions, WTI prices are expected to average $43 per barrel in 2009 and $55 per barrel in 2010. The possibility of a milder recession or faster economic recovery, lower non-OPEC production because of the current low oil prices and financial market constraints, and more aggressive action to lower production by OPEC countries could lead to a faster and stronger recovery in oil prices.
Regular-grade gasoline prices are projected to average $1.95 per gallon in 2009 and $2.19 per gallon in 2010. Because of lower motor gasoline consumption, refining margins for gasoline are expected to remain low for much of 2009 but are expected to increase slightly in 2010 as consumption begins to recover.
On-highway diesel fuel retail prices, which averaged $3.79 per gallon in 2008, are projected to average $2.28 per gallon in 2009 and $2.55 in 2010. The expected continuation of the decline in diesel fuel consumption in the United States this year as well as a slowing of the growth in distillate fuel usage outside the United States are projected to result in a narrowing of refining margins for distillate throughout the forecast
February 10, 2009 Release
Highlights
U.S. real gross domestic product (GDP) is expected to decline by 2.7 percent in 2009, triggering decreases in domestic energy consumption for all major fuels. Economic recovery is projected to begin in 2010, with 2.2 percent year-over-year growth in GDP. Accompanying the projected economic recovery should be a mild rebound in energy consumption for all the major fuels in 2010.
Over the past 6 months, the monthly average price of West Texas Intermediate (WTI) crude oil fell from $133 per barrel in July to $41 in December and January. WTI prices are projected to average $43 per barrel in 2009 and $55 in 2010, unchanged from last month’s Outlook.
The U.S. price for regular gasoline averaged $1.69 per gallon in December 2008, the lowest monthly average since February 2004 and down nearly $2.40 per gallon from the monthly peak seen last July. Gasoline prices have been slowly increasing over the last 6 weeks as crude oil prices have stabilized and refiner margins have recovered from their recent near-historic lows. Retail gasoline prices are projected to average $1.95 per gallon in 2009 and $2.19 per gallon in 2010.
The U.S. economic downturn is also contributing to a decline in natural gas consumption, particularly in the industrial sector, which has led to lower natural gas prices. The Henry Hub natural gas spot price is projected to decline from an average of $9.13 per thousand cubic feet (Mcf) in 2008 to about $5 per Mcf in 2009, but then increase in 2010 to an average of almost $6 per Mcf.
Global Petroleum
Overview. The worsening global economy and a weak oil consumption outlook are keeping the world oil market well supplied, despite two downward revisions in production targets by the Organization of the Petroleum Exporting Countries (OPEC) within the past few months. Lower global oil demand and rising surplus production capacity through at least mid-year 2009 reduce the possibility for a strong and sustained rebound in oil prices over that period. OPEC is scheduled to meet in Vienna on March 15, which could lead to another production cut to mitigate some of the slack in the world oil market. However, near-month oil prices will likely be driven primarily by the global economy. Global real gross domestic product (GDP, weighted according to shares of world oil consumption) is assumed to decline by 0.1 percent in 2009 and rise by 3.0 percent in 2010, versus last month’s assessment of 0.6-percent growth in real GDP in 2009 and 3.0-percent growth in 2010.
Consumption. World oil consumption is projected to fall by 1.2 million bbl/d in 2009, representing an additional decline of 400,000 bbl/d from last month’s Outlook. World oil consumption is expected to rebound in 2010, growing by more than 1.2 million bbl/d, due to an expected recovery in the global economy. Oil consumption growth over the next 2 years is concentrated in countries outside of the Organization for Economic Cooperation and Development (OECD), particularly China, the Middle East, and Latin America, offsetting projected declines in OECD oil consumption. If the world economy recovers sooner than EIA now anticipates, oil consumption could be higher than expected, putting upward pressure on oil prices.
Non-OPEC Supply. Non-OPEC oil supply is expected to grow by 150,000 bbl/d in 2009 and 130,000 bbl/d in 2010. The expected growth in non-OPEC supply over the next 2 years comes in stark contrast to the 330,000-bbl/d decline seen in 2008, which was the result of longer-than-expected delays in key projects, larger-than-expected decline rates in mature basins, and supply disruptions in the Gulf of Mexico and Central Asia. The largest sources of growth over the forecast period are the United States, Brazil, and Azerbaijan, offset by large declines in production in Mexico, the North Sea, and Russia. The expected decline in Russian output in 2009 (-160,000 bbl/d) is especially noteworthy. Russian oil production grew by 3 million bbl/d from 2000 through 2007, representing 75 percent of total non-OPEC oil production growth over that period.
There are downside risks to the outlook for non-OPEC supply, as additional project delays are certainly possible given the financial crisis and the current price environment. Sustained lower oil prices bring into doubt the viability of some high‐cost non‐OPEC projects, especially those utilizing nonconventional technology or those seeking to exploit frontier oil basins. The credit crunch associated with the global economic crisis can also make it difficult to acquire financing for new projects or even to finance the investment required to prevent accelerated declines at producing fields. EIA's forecast reflects an attempt to account for some of these potential delays.
OPEC Supply. OPEC producers are cutting crude production targets in response to lower prices and eroding consumption. Estimated OPEC crude oil production fell by 1 million bbl/d during the fourth quarter of 2008, reaching 30.7 million bbl/d. OPEC crude oil production is expected to fall by an additional 1.6 million bbl/d in the first quarter of 2009 to 29.1 million bbl/d, the lowest level in 5 years, largely resulting from lower production in Saudi Arabia. The decline of 2.6 million bbl/d over this period represents nearly two-thirds of the 4.2-million-bbl/d cut in OPEC’s production target announced at its December meeting. For the year, OPEC crude oil production is expected to average 29.4 million bbl/d, then rise to 30.1 million bbl/d in 2010. In addition, EIA expects that OPEC production of non‐crude liquids will rise substantially next year, growing by 660,000 bbl/d in 2009 and by 870,000 bbl/d in 2010, due to increasing condensate and natural gas production.
The combination of lower demand for OPEC crude oil, increasing production of non-crude liquids, and the capacity expansions expected in several OPEC countries means that surplus production capacity could increase dramatically over the next 2 years. OPEC surplus production capacity could average 4.3 million bbl/d in 2009, eventually exceeding 5 million bbl/d by the end of 2010. By comparison, OPEC surplus production capacity ranged from 1 to 2 million bbl/d over the past 5 years. The lack of surplus production capacity was a crucial factor during the run-up in oil prices through the first half of 2008. If OPEC does hold 4 to 5 million bbl/d of surplus production capacity over the next 2 years, this could act to cushion the world oil market and help mitigate the price effect of perceived or actual supply disruptions.
Inventories. Preliminary data indicate that OECD commercial inventories stood at 2.58 billion barrels at the end of 2008, equivalent to 52 days of forward cover, above average levels for that time of year. Measured as days of forward cover, OECD commercial inventories are projected to remain above average levels through the end of 2010. High crude inventories in some markets, along with a growing use of floating storage, are signs that the oil market is well supplied. Along with ample OPEC surplus production capacity, high commercial inventories should help mitigate any strong upward price pressures.
U.S. Petroleum
Consumption. Total petroleum products consumption in 2008 declined by almost 1.2 million bbl/d, or 5.8 percent, from the 2007 average, the largest annual decline since 1980. The major factors behind the fall in consumption were a rapid rise in retail prices to record levels during the first half of 2008 followed by a weakening economy in the second half. Motor gasoline consumption in 2008 declined by 320,000 bbl/d, or 3.4 percent. Despite the cold weather that gripped much of the Lower-48 States in December, distillate fuel consumption in 2008 fell by 5.4 percent from the previous year as a result of precipitous declines in transportation consumption of diesel fuel. Major reductions in airline capacity during the fourth quarter contributed to the 100,000-bbl/d, or 6.2-percent, drop in jet fuel consumption. Total petroleum products consumption in 2009 is projected to fall by a further 460,000 bbl/d, or 2.4 percent, because of continued economic weakness. Consumption of both motor gasoline and distillate fuel are projected to decline by about 100,000 bbl/d each. Jet fuel is forecast to fall by a further 60,000 bbl/d. The expected economic recovery in 2010 is projected to boost total petroleum products consumption by 220,000 bbl/d, or 1.1 percent.
Production. In 2008, domestic crude oil production averaged 4.95 million bbl/d, down by 110,000 bbl/d from 2007. However, in 2009, domestic output is projected to increase by about 400,000 bbl/d to an average of 5.35 million bbl/d. This would be the first increase in production since 1991. Output is projected to rise by a further 130,000 bbl/d in 2010. Contributing to the increases in output are the Gulf of Mexico Thunder Horse platform, which is coming on stream now, and the Tahiti platform, expected to come on stream later this year.
Prices. WTI prices averaged almost $100 per barrel in 2008, with daily spot prices ranging from almost $150 per barrel in early July to about $30 per barrel towards the end of the year. Under current economic and world crude oil supply assumptions, WTI prices are expected to average $43 per barrel in 2009 and $55 per barrel in 2010. The possibility of a milder recession or faster economic recovery, lower non-OPEC production because of the current low oil prices and financial market constraints, and more aggressive action to lower production by OPEC countries could lead to a faster and stronger recovery in oil prices.
Regular-grade gasoline prices are projected to average $1.95 per gallon in 2009 and $2.19 per gallon in 2010. Because of lower motor gasoline consumption, refining margins for gasoline are expected to remain low for much of 2009 but are expected to increase slightly in 2010 as consumption begins to recover.
On-highway diesel fuel retail prices, which averaged $3.79 per gallon in 2008, are projected to average $2.28 per gallon in 2009 and $2.55 in 2010. The expected continuation of the decline in diesel fuel consumption in the United States this year as well as a slowing of the growth in distillate fuel usage outside the United States are projected to result in a narrowing of refining margins for distillate throughout the forecast