EIA Oil Forecast

[dan_s]

They are talking about total liquids (OIL + NGLs)

December 13, 2017: EIA forecasts a mostly balanced oil market in 2018

The U.S. Energy Information Administration's (EIA) December Short-Term Energy Outlook (STEO) expects global liquid fuels demand to increase in 2018, but not keep pace with supply growth, resulting in global liquids inventories increasing modestly in 2018. STEO forecasts increasing global liquid fuels inventories by an average of 50,000 barrels per day (b/d) in 2018, a downward revision from a 290,000 b/d inventory increase forecast in the November STEO (Figure 1). The change in STEO is driven by upward historical revisions to Chinese consumption and downward revisions to forecast production from countries within the Organization of the Petroleum Exporting Countries (OPEC).

On November 30, 2017, OPEC announced an extension of its agreement to reduce crude oil production through the end of 2018, which was broadly in line with both EIA’s November STEO and market expectations in the days leading up to the meeting. The non-OPEC countries that agreed to crude oil production cuts in 2017 also agreed to continue limiting output through the end of 2018. Saudi Arabia and Russia will co-chair a monitoring committee designed to assess the group’s adherence to the production targets. The group plans to reassess target production levels at their June 2018 meeting in the context of market conditions at that time. EIA estimates OPEC crude oil production averaged 32.5 million b/d in 2017, a 0.2 million b/d decrease from 2016 levels, and forecasts OPEC crude oil production to average 32.7 million b/d in 2018.

Although OPEC is expected to restrain production growth, EIA forecasts that higher output from non-OPEC countries will contribute to overall growth in world liquid fuels production in 2018. The non-OPEC outlook for liquid fuels production is 0.1 million b/d higher than EIA’s November STEO, averaging 60.3 million b/d in 2018, 1.7 million b/d higher than the 2017 level. This growth, together with the forecast 0.3 million b/d growth in OPEC crude oil production and another 0.1 million b/d increase in OPEC non-crude liquids production, results in forecast total global liquids production growth of 2.0 million b/d in 2018 (Figure 2). EIA expects that crude oil price increases in late 2017 will support growth in U.S. crude oil production to more than 10.0 million b/d by mid-2018. Overall U.S. crude oil production is forecast to increase by an average of 0.8 million b/d in 2018. Canada, Brazil, Norway, the United Kingdom, and Kazakhstan are also forecast to add a combined 0.7 million b/d of growth in liquids production in 2018.
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MY TAKE: By the end of 2018 this world will be consuming over 100,000,000 barrels of hydrocarbon based liquid fuels and feedstock (includes those made from biofuels). Therefore, very small percentage differences from the supply and demand numbers that EIA and IEA are throwing around will have a BIG IMPACT on product prices.

I think both agencies are underestimating demand growth, which they seem to do each year. I also think they are over-estimating U.S. supply growth. One thing that is not mentioned is that it will take a lot more midstream infrastructure to handle an increase of 800,000 BOPD onshore U.S.

[dan_s]

Residential heating oil and propane prices entered the winter heating season higher than last winter’s prices, and EIA’s Short-Term Energy Outlook (STEO) forecasts those prices will remain higher through March. As a result of higher crude oil prices, colder expected winter temperatures, and lower fuel inventories than last winter, EIA forecasts that U.S. average heating oil and propane prices will be 12% higher and 10% higher, respectively.

Although inventories of heating oil and propane are lower this year than last year, they are still within the range of values experienced in the previous five years at this time. As of November 24, distillate fuel oil inventories in the Northeast (Petroleum Administration for Defense Districts 1A and 1B), where the vast majority of heating oil is consumed, totaled 37.7 million barrels, 31% lower than at the same time last year. Total U.S. propane inventory levels were 73.2 million barrels as of November 24, 27% lower than at the same time last year.

This is good news for the companies that produce a lot of NGLs.