The U.S. Energy Information Administration (EIA) estimates that global liquid fuels consumption outpaced production in January and February 2013, resulting in a 1.3-million-barrel-per-day (bbl/d) average draw in global oil stocks. Crude oil prices moved higher during this period, rising above the trading range they had been in for much of fourth quarter 2012. The front month Brent futures contract averaged $114.08 per barrel for the five-day period ending February 26, about $5 per barrel higher than the five-day period ending December 21. On February 8, Brent crude oil prices settled at their highest level since early May 2012.
Global liquid fuels consumption decreased during January and February 2013 compared with the previous 60-day period (November and December 2012) by an average of 0.2 million bbl/d, but it was above the historical three-year average and the volumes consumed during the same time period last year. Non-OECD countries, particularly China, accounted for almost all of the 0.6-million-bbl/d increase in total world consumption over year-ago levels . European members of the Organization for Economic Cooperation and Development (OECD) saw consumption decrease by 0.3 million bbl/d on average during January and February 2013 compared with year-ago levels as warmer weather, albeit still colder than normal, limited the amount of liquid fuels needed for space-heating this year. Japan's consumption was 0.2 million bbl/d lower than last year, but it exceeded recent historical averages by approximately 14 percent because of ongoing nuclear power outages.
Global liquid fuels production decreased by an average of 0.6 million bbl/d in January and February 2013 compared to year-ago levels, due to a decline in production from members of the Organization of the Petroleum Exporting Countries (OPEC) and flat non-OPEC production. The fall in OPEC output was the result of declining crude output in Saudi Arabia and Iran, which more than offset increases from Iraq, Libya, and OPEC non-crude liquids. World supply also fell, by an average of 0.8 million bbl/d relative to the previous 60-day period, due to small production declines that occurred in the United States, Russia, and Australia; the latter was due to unplanned outages. Brazilian production averaged 0.3 million bbl/d lower than the previous 60-day period, but this reflects seasonal fluctuations in ethanol production rather than a decline in crude oil output. The total volume of production that is offline due to unplanned outages in non-OPEC countries rose over the past 60 days and continues to exceed the more typical levels that prevailed in fourth quarter 2011. In addition to Australia, unplanned outages in the North Sea and Colombia caused the overall average volume of non-OPEC oil production disruptions to increase by more than 60 thousand bbl/d during January and February 2013 relative to the previous 60-day period. Despite the increase in unplanned outages, total production volumes in the North Sea and Colombia remained at approximately the same level.
Iran's liquid fuels production averaged 3.4 million bbl/d in January and February 2013, of which 2.8 million bbl/d was crude oil. Iran's liquid fuels production increased approximately 0.1 million bbl/d compared with the previous 60-day period. Nonetheless, Iran's liquid fuels production remains well below its year-ago level of 4.0 million bbl/d.
Global surplus capacity increased by an average of 0.6 million bbl/d in January and February 2013 compared to the year-ago level, but it still remains 0.3 million bbl/d lower than the historical three-year average. The estimate of effective surplus crude oil production capacity does not include additional capacity that may be technically available in Iran, but which is offline due to the impacts of U.S. and European Union (EU) sanctions on Iran's ability to sell its oil.
The global balance between production and consumption implies that net global inventories, including those held in emerging market economies, fell by 0.5 million bbl/d and 2.2 million bbl/d in January and February, respectively . These stock draws coincided with an increase in backwardation (when near-month prices are higher than farther dated prices) in the Brent futures curve and signaled tightness in the world waterborne crude market. For the five-day period ending February 26, the 1st-13th month time spread for the Brent futures curve was $7.93 per barrel, an increase of $1.63 per barrel since the five-day period ending December 21.
EIA has revised its estimates of total world supply and consumption for November and December 2012, which were published in the previous report released on December 20, 2012. The latest estimates show that world liquid fuels production averaged 89.1 million bbl/d in November and December 2012, which was approximately 0.3 million bbl/d higher than previously estimated. At the same time, EIA's estimate of world liquid fuels consumption was revised down by about 0.4 million bbl/d to 89.8 million bbl/d for the 60-day period, resulting in a 0.6-million-bbl/d average draw in global oil stocks. Supply increases were mainly the result of higher-than-previously estimated production among non-OPEC producers, particularly the United States, Russia, Australia, and China, which were partially offset by lower production estimates for Saudi Arabia and Libya, as well as lower-than-previously estimated OPEC non-crude liquids production.
Source: EIA