It is that time of the year again, a time when one is impelled to look back at last year and forward to the New Year that is upon us.The market witnessed a further impressive surge in US oil production this year, thanks to the country’s shale oil revolution, which took the US’ 2013 average to 7.3 mbpd in September — up by 1.0 mbpd, or 16%, on a year-on-year basis.

North Dakota and Texas, focal points of the US oil fracking industry, both posted annual average oil production growth rates of 31% to September and are showing no signs of slowing down, apart from weather-related pauses, in their headlong rush to produce as much additional oil as possible in as short a time as is feasible.

On the flip side of the supply coin, we had oilfield and export terminal strikes that began to plague Libya in June, causing its oil production to plummet from 1.4 mbpd in May to 0.2 mbpd in November.

CGES oil price forecasts

Despite the difficulties posed by the uncertainties that always swirl around the oil market, the CGES had a reasonably good forecasting year.

Back in January 2013, we predicted in our Monthly Oil Report that Dated Brent would average $104.7/bbl for 2013 as a whole and until the 17th of December Brent had actually averaged $108.6/bbl (based on daily data), yielding a 3.6% under-prediction.

As for our forecasts of other key variables such as non-OPEC production, global oil demand, OECD and non-OECD oil consumption, OPEC’s natural gas liquids, the zero-stock-change call on OPEC oil and OPEC’s output levels, all have prediction errors well below, or in the case of OPEC’s production, at 1% (see the accompanying table).

Given that we under-predicted global oil demand and the zero stock change call on OPEC, it is not really surprising that we under predicted slightly the price of oil as well.

Peering into the mists surrounding 2014, it seems that we are likely to encounter a year not very different from the one that is receding into history.
Source: CGES