Title: EIA sees OPEC output trailing global demand over next 6 months
Byline: Margaret McQuaile, Daniel Goldstein
Section: MARKETS & DATA; Pg. 9 Vol. 86 No. 199
Length: 885 words
Link to relevant WorldOilNews blog posting here.
Demand for OPEC crude will exceed the oil producer group's actual output over the next six months unless the global economy turns out to be weaker than expected, the US Energy Information Administration said October 7 in its latest Short Term Energy Outlook.
OPEC's 13 members produced 32.34 million b/d in September, 350,000 b/d lower than August's 32.69 million b/d, the EIA said.
The lower September volume was mainly the result of a 200,000 b/d drop in output from OPEC kingpin producer Saudi Arabia and a 100,000 b/d drop in Iraqi output, the EIA estimates showed.
Saudi production fell to 9.4 million b/d from 9.6 million b/d, while Iraqi output fell to 2.35 million b/d from 2.45 million b/d, the EIA said.
The EIA estimates show Saudi output climbing from 9.1 million b/d in April to 9.7 million b/d in July before dropping to 9.6 million b/d in August and 9.4 million b/d in September.
Excluding Iraq, production from the 12 members bound by output agreements fell by 250,000 b/d to 29.99 million b/d, leaving OPEC-12 output 317,000 b/d over the 29.673 million b/d official limit.
The EIA said OPEC's call at its September 9 meeting for greater compliance with official limits suggested a 500,000 b/d cut in output.
"But this outcome is uncertain," the EIA said. It will "depend on Saudi Arabia's willingness to cut," the EIA said.
"Taking into account uncertainties about Saudi actions, this Outlook assumes that OPEC crude oil production declines to 32.4 million b/d in the fourth quarter of 2008 [from 32.7 million b/d in the third quarter] and falls through 2009 to an average of 31.6 million b/d for that year," the EIA said.
Last month, the EIA forecast 2009 OPEC production of 32.05 million b/d.
The EIA said the combination of higher oil production from Saudi Arabia over the summer, the impact of high prices on demand and the likely impact of the credit market turmoil on the world economy suggested a "loosening" in the global oil balance.
"However, unless the global economy is weaker than anticipated, EIA expects that the call on Organization of the Petroleum Exporting Countries' (OPEC) crude oil will exceed OPEC crude oil production over the next six months," it said.
This market balance and the relatively low level of OECD commercial oil inventories suggest some upward pressure on prices, the EIA said. However, it added, "if non-OPEC oil production increases as expected during 2009, oil price pressures would then moderate."
Global oil consumption is projected to increase by about 300,000 b/d in 2008, to 86.14 million b/d, compared to last year, EIA said. Projected growth for 2008 is nearly 350,000 b/d lower that last month's projection, reflecting the deteriorating global economic outlook.
OPEC will meet in December to determine where to keep its production level. Howard Gruenspecht, acting head of the EIA, told reporters that Saudi Arabia's take on the ongoing economic troubles would be very important. He added that how suppliers like OPEC respond to declining demand will be critical in the coming months.
"What really matters in particular is how Saudi Arabia sees the situation and what in particular the goals of Saudi Arabia really are."
The spot price of West Texas Intermediate crude oil is projected to average $111.57/barrel in 2008, compared to $72.32/b in 2007, EIA reported.
Last month, the agency projected an average WTI price for the year of $116/b. EIA is projecting an average WTI price of $112/b in 2009, compared to $126.50/b predicted last month.
Average regular retail gasoline and diesel prices in the US are projected to be $3.56/gal and $4.01/gal respectively for 2008, EIA said. In September, EIA projected an annual retail gasoline price of $3.61/gal, and $4.09/gal for diesel.
For 2009, EIA is projecting average gasoline prices of $3.56/gal, and $3.91/gal for diesel, compared to $3.88/gal for gasoline predicted last month and $4.26/gal expected last month for diesel.
In 2007, gasoline averaged $2.81/gal and diesel averaged $2.88/gal.
"You could continue to see gasoline prices continuing to move south," Gruenspecht said. "If you see oil prices stay at $90, that's consistent with $3 gasoline. Lower oil prices are the silver lining in bad [economic news]."
Total US petroleum and other liquids consumption is projected to decline by about 830,000 b/d, or about 4%, in 2008 compared to last year, EIA said. The agency based its forecast on prospects for a weaker economy and high crude oil and products prices continuing in 2009. Last month, the agency projected a decline of 610,000 b/d, or 3%.
US crude production is projected to average 4.96 million b/d in 2008, EIA reported. In 2007, production averaged 5.06 million b/d. Last month, the EIA said crude production would average 5.13 million b/d this year.
The projection includes an assumption of hurricane-induced offshore outages of about 32 million barrels, EIA said.
Fuel ethanol production is projected to increase to 590,000 b/d in 2008 and to 660,000 b/d in 2009 from 430,000 b/d in 2007, EIA said, unchanged from a month ago. Because of the decline in petroleum consumption and the growth of ethanol production, net crude imports are projected to be 9.64 million b/d in 2008 and 9.25 million b/d in 2009, EIA said. In 2007, net imports were 10 million b/d.
Margaret McQuaile, Daniel Goldstein
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