World Supply and Demand Forecasts
The EIA (Energy Information Administration) expects global petroleum and liquids production or total world supply to average 94.16 MMbbl/d in 2015 and 94.26 MMbbl/d in 2016. Production totaled 93 MMbbl/d in 2014.
The EIA estimates global consumption to have averaged 92 MMbbl/d in 2014. It expects that global consumption will grow by 1 MMbbl/d to 93 MMbbl/d in 2015 and by another 1.1 MMbbl/d in 2016, to 94.1 MMbbl/d.
Per the STEO (the EIA’s “Short Term Energy Outlook”), global petroleum and liquids production will exceed demand for the next two years.
When supply outpaces demand, inventories swell. This effect is bearish for crude oil prices and it affects the profitability of oil producers like Apache (APA), Murphy Oil (MUR), Hess (HES), and Pioneer Resources (PXD). All these companies are part of the Energy Select Sector SPDR ETF (XLE). They make up 7.5% of this ETF.
The STEO notes, “Given the preliminary nature of the recent developments, EIA has not changed its short-term projection for Iranian production, which assumes that production will stay close to the current level. However, if a comprehensive deal is reached, the re-entry of more Iranian barrels could result in a $5-$15/bbl lower baseline STEO price projection in 2016 compared with the current STEO.”
Read the previous part of this series to learn about STEO price projections for 2015 and 2016.
Global oil inventories
Global oil inventory builds are expected to average 1.7 MMbbl/d in the 1H 2015. These builds will later moderate in the second half of the year as non-OPEC supply, particularly in the US, slows (due to low prices) and demand rises.
Non-OPEC petroleum and other liquids supply
Per the EIA, non-OPEC production grew by 2.2 MMbbls/d in 2014. In 2015, the EIA expects supply growth to slow to 0.7 MMbbl/d. The EIA expects a slower 0.4 MMbbl/d in 2016 because of lower forecasted oil prices. The slowing growth is due mostly to slower production growth in the US.
OPEC petroleum and other liquids supply
According to EIA estimates, OPEC crude oil production averaged 30.1 million bpd in 2014. Non-crude oil liquids production averaged 6.3 million bpd in 2014. The EIA expects OPEC crude production to increase by 0.1 MMbbl/d in 2015 and decline by 0.5 million bpd in 2016. Non-crude liquids production is expected to increase by 0.2 MMbbl/d in 2015 and by 0.1 MMbbl/d in 2016.
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