The U.S. Energy Information Administration (EIA) estimates that global liquid fuels1 consumption outpaced supply in September and October 2013, resulting in a 0.3-million-barrel-per-day (bbl/d) average withdrawal in global oil stocks, which is lower than the average 0.5-million-bbl/d stock draw during July and August.
Prices fell modestly in September and October relative to the prior 60-day period, reflecting lower consumption coupled with an increase in surplus production capacity. The Brent front month futures price averaged about $108 per barrel for the five-trading-day period ending October 29, a decrease of about $3 per barrel compared with the five-trading-day average ending August 27. The drop in U.S. crude oil prices during the same time was larger, as U.S. commercial crude oil inventories grew.
The front month futures price for West Texas Intermediate (WTI) settled at an average of $98 per barrel for the five-days ending on October 29, a decline of about $8 per barrel since the five-day period ending August 27. In September and October 2013, Brent averaged slightly higher than $110 per barrel, nearly $2 per barrel lower than in the September-October period last year (Table 1).
Global liquid fuels2 consumption during September and October averaged 0.5 million bbl/d lower than its average during the previous 60-day period, which is consistent with the seasonal pattern marked by both the end of the U.S. driving season and the easing of oil use for electricity generation in the Middle East (Table 2).
The seasonal decline in global refinery runs resulted in lower crude oil inventory withdrawals in October compared with September and a decrease in backwardation (when near-month prices are higher than farther dated prices) of the Brent futures curve (Figure 3). The 1st-13th month spread for the Brent futures curve averaged about $6 per barrel for the five-trading-day period ending October 29. This is a decrease of about $2 per barrel compared with the five-trading-days ending August 27 and relatively unchanged compared to this time last year.
Global liquid fuels supply during September and October was 0.3 million bbl/d lower than the average during the previous 60-day period. The decrease in world oil supply compared with the previous 60-day period reflects a 0.8-million-bbl/d decline in total production from members of the Organization of the Petroleum Exporting Countries (OPEC), namely Iraq, Libya, and Saudi Arabia (Table 3). Crude oil output declines from Iraq and Libya reflect unplanned supply disruptions, while cutbacks to Saudi Arabia's production were primarily because of reduced direct burn of crude oil for power generation. Non-OPEC liquid fuels production increased by 0.5 million bbl/d over the previous 60-day period but was more than offset by the decrease in total OPEC output (Table 4).
Global surplus crude oil production capacity in September and October 2013 averaged 1.8 million bbl/d, which is 0.2 million bbl/d above the average during the previous 60-day period but still 0.3 million bbl/d below the year-ago level (Table 3). The estimate of effective surplus 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 total volume of production that is offline due to unplanned outages in OPEC and non-OPEC countries is estimated to be 2.9 million bbl/d in both September and October, virtually unchanged from the average during the previous 60-day period. EIA's estimates of unplanned outages account for crude oil only among OPEC producers and all liquid fuels among non-OPEC producers. These estimates of unplanned outages exclude normal maintenance and reflect the level of volumes shut in relative to an assessment of effective production capacity, which is periodically updated. In Iraq, roughly 400,000 bbl/d was offline in September because of planned maintenance on southern export terminals, but this volume was excluded from EIA's disruption estimate because markets were made aware of the loss beforehand.
Global disruptions were mainly driven by higher outages among OPEC producers in September and higher non-OPEC outages in October. OPEC crude oil supply disruptions reached 2.3 million bbl/d in September, the highest level since at least January 2009 from when EIA has tracked OPEC disruptions, and remained close to that level in October (Figure 4). Non-OPEC outages fell in September for the second consecutive month, but increased in October because of new outages in the United States, Brazil, Canada, and Colombia. EIA estimates that unplanned disruptions averaged 0.6 million bbl/d among non-OPEC producers and 2.3 million bbl/d among OPEC members for September and October (Figure 5).
Because Libya has experienced several major swings in production since June, estimates of the monthly average disruption can obscure developments over shorter time periods. At the beginning of September, Libya's production was very low. Rising production over the course of that month led October to start with significantly higher production levels, resulting in an estimated average disruption during October that is closer to the August average level than to the higher average level for September. Towards the end of October, however, Libyan production again declined sharply.
Iran's liquid fuels production averaged 3.5 million bbl/d in September and October, of which 2.8 million bbl/d was crude oil. Iran's liquid fuels production remains well below the three-year average of 4.0 million bbl/d (Table 1). Production in September and October was 0.2 million bbl/d above the output level during the same period last year, which mostly reflects the timing of sanctions imposed on Iranian oil exports in 2012. Sanctions enacted by the EU, which not only banned all imports of Iranian oil, but also barred all EU insurance companies from providing protection and indemnity coverage to vessels that carry Iranian oil became effective in July 2012, resulted in precipitous declines in Iranian production in subsequent months.
EIA has revised the preliminary estimates for July and August 2013 liquid fuels production, consumption, and stock draws published in the previous edition of this report. World liquid fuels production was revised upward by 0.1 million bbl/d to average 90.7 million bbl/d, while the estimate for global liquid fuels consumption was also revised upward by 0.3 million bbl/d to average 91.1 million bbl/d. Inventory net withdrawals for July and August averaged 0.5 million bbl/d, which was 0.2 million bbl/d higher than previously estimated. Surplus crude oil production capacity averaged 1.7 million bbl/d in July and August, about 0.5 million bbl/d lower than previously estimated.
The change resulted from an upward revision to total OPEC crude oil production, stemming mostly from Saudi Arabia. EIA confirmed that Saudi Arabia's production remained at a higher level during that period in response to higher-than-normal global supply disruptions, particularly in August.
http://www.eia.gov/analysis/requests/ndaa/pdf/ndaa.pdf
Source: EIA