In the May STEO, EIA expects energy demand growth to bring the global oil market into balance between Q3 2023 and Q1 2024. EIA estimated global liquids fuel production to increases by 1.5 million b/d in 2023 compared with 2022 primarily because of growth from non-OPEC producers. Excluding production from Russia, which is forecast to fall by 0.3 million b/d in 2023, they expect non-OPEC liquid fuels production to increase by 2.2 million b/d in 2023 and by an additional 1.1 million b/d in 2024.
For the U.S. they see the current year crude forecast 12.53bpd slightly down from prior 12.54mbpd and 2023 at 12.69mbpd down from 12.75mbpd. 2024 annual output growth s/b at an average rate of 160k b/d vs the prior forecast of 210k b/d. EIA expects the Brent crude oil spot price to Avg $74/Bbl In 2024, $7/Bbl lower than previous forecast.
Risks Increased in April
The Brent crude oil spot price fell from an average of $85 dollars per barrel (b) in April to close at $73/b on May 4. At the beginning of April, OPEC and partner countries (OPEC+) announced a cut to crude oil production of 1.2 million barrels per day (b/d) through the end of 2023, which increased crude oil prices on expectations of tightening oil supplies. However, ongoing considerations about weakening global economic conditions, perceived risk around the global banking sector, and persistent inflation outweighed the initial increase in oil prices and have led to lower prices.
EIA May 2023 STEO
STEO Global Oil Consumption Highlights
- EIA forecasts global liquid fuels consumption increases by 1.6 million b/d in 2023 and by 1.7 million b/d in 2024, and most expected liquid fuels demand growth is in non-OECD Asia, led by China and India.
- EIA see demand growth bringing the global oil market into balance between the third quarter of 2023 (3Q23) and 1Q24 and push the Brent price from current levels back to between $75/b and $80/b.
- Beginning in 2Q24, they expect consistent global oil inventory builds over the rest of the forecast period as global oil production outpaces global oil demand, putting downward pressure on crude oil prices.
- They forecast global oil inventories will grow by 0.3 million b/d in 2024,
- Forecast the Brent crude oil spot price to average $74/b in 2024, $7/b lower than in last month’s STEO.
STEO Global Oil Production Highlights
- In 2021 and 2022, more than half of the increase in production of liquid fuels globally occurred in member countries of the Organization of the Petroleum Exporting Countries, or OPEC. EIA expect that percentage to shift in 2023 and 2024 when non-OPEC countries will account for more production growth as a number of long-term development projects come online.
- Global liquid fuels production is forecast to increase by 1.5 million b/d in 2023 compared with 2022 primarily because of growth from non-OPEC producers.
- Excluding production from Russia, EIA forecast to fall by 0.3 million b/d in 2023, EIA expect that non-OPEC liquid fuels production will increase by 2.2 million b/d in 2023 and by an additional 1.1 million b/d in 2024.
- EIA forecast Russia’s crude oil and other liquid fuels production will decline from 10.9 million b/d in 2022 to 10.6 million b/d in 2023 and to 10.5 million b/d in 2024.
- Russia’s production in March and April declined in part due to announced production cuts of 0.5 million b/d and maintenance at refineries in Russia, which we expect will end in June.
- EIA’s assumption of a return to near-normal refinery operations contribute to a slight increase in Russia’s liquids fuel production from 10.4 million b/d in the second quarter of 2023 to 10.5 million b/d through 2024.
- EIA forecast that total OPEC crude oil output will fall by 0.3 million b/d in 2023, in large part due to the April 3 OPEC+ announcement to cut production. In addition to the expected adherence to the voluntary production cuts, recent disruptions to crude oil exports in Iraq and a force majeure limiting crude oil exports in Nigeria have also reduced our near-term OPEC forecast in 2023.
- EIA forecast total OPEC liquid fuels production to increase by 0.6 million b/d in 2024 driven by the end of the current OPEC+ production cuts in 2023.
- Forecast remains uncertain as a number of factors, including global economic growth, Russia’s production, and possible delays in expected project start-up dates could affect the production outlook.
OPEC Cuts to be Offset (From April)
North America
- North America, South America, and Western Europe will also significantly increase production in 2023 and 2024. These increases will offset production cuts announced in April 2023 by OPEC+.
- U.S. liquid fuels production increases from 20.2 million b/d in 2022 to a record 21.6 million b/d in 2024, led by crude oil production increases from the Permian shale region in western Texas and eastern New Mexico. EIA expect significant increases in hydrocarbon gas liquid (HGL) and biofuel (especially renewable diesel) production to contribute to overall liquid fuels production growth.
- Canada’s liquid fuels production in EIA’s forecast grows from 5.7 million b/d in 2022 to 6.2 million b/d in 2024 driven by increasing oil sands production in Alberta and higher HGL production. The Trans Mountain Expansion project, which is scheduled to begin operating in late 2023, will support some of this production growth. The Trans Mountain Pipeline transports crude oil from the oil sands production areas in Alberta to the coast of British Columbia. The project will expand existing pipeline capacity from 300,000 b/d to 890,000 b/d, and it will free up previously constrained volumes of unproduced crude oil for export to global markets in Asia.
- Mexico’s liquid fuels production growth in 2023 is relatively limited. While EIA expect increased production from the operation of foreign-operated oil fields developed in 2022, this increase will largely offset production declines from mature fields operated solely by the state-owned Petróleos Mexicanos (Pemex).
South America
- Brazil’s liquid fuels production averaged an estimated 3.8 million b/d in 2022, and EIA expect it will increase to 4.1 million b/d in 2024. This growth mostly results from the expected startup of several new floating production, storage, and offloading (FPSO) units in 2023. In addition, the continued production ramp-up from projects in offshore oil fields, such as Sépia, Búzios and Mero. The remaining growth in Brazil’s liquid fuels production will come from growth in biofuel output increasingly from ethanol produced from corn rather than sugarcane.
- Guyana first began producing oil in 2019 after the new offshore, deepwater Liza oil field in the Stabroek Block discovery, and production has increased rapidly, averaging 260,000 b/d in 2022. EIA expect Guyana’s oil production will increase to average 480,000 b/d in 2024 due to continued development in the Liza oil field and the start of the Payara project in late 2023.
- Argentina’s production will continue to grow slightly because of increased development and investment in the Vaca Muerta shale formation. EIA Argentina’s liquid fuels production to increase from 0.8 million b/d in 2022 to 0.9 million b/d in 2024.
Europe, Europe and Asia
- Norway in December 2022 started up the Johan Sverdrup Phase 2 expansion project will add significant crude oil volumes for Europe at a time when we forecast oil production in Russia will decline. This expansion project will help Norway’s liquid fuels production increase from 1.9 million b/d in 2022 to 2.4 million b/d in 2024. This increase offsets liquid fuels production declines in Russia, which we expect to fall from 10.9 million b/d in 2022 to 10.4 million b/d in 2024.
Russia and other countries add uncertainty to non-OPEC production forecast
EIA anticipate heightened uncertainty around forecasts. They assume Russia will be able to reroute some of its petroleum exports subject to EU sanctions. This assumption involves the willingness for other countries to continue to buy Russia’s exports and the continued availability of tanker capacity to transport Russian petroleum.
EIA warns oil production in other non-OPEC countries may be affected by increasing macroeconomic risks around the global banking sector and the access to capital, as well as the potential for delay or disruption to the startup of expected oil projects, including those impacted by environmental, social, and governance concerns.
Source: EIA
From The TradersCommunity Desk