EIA outlook for 2012 shows oil market will tighten

In last week’s oil outlook of the Energy Information Administration for 2011 it was reported that EIA analysts expect that the OPEC crude oil production will decline in 2011 by 450,000 bbl/d compared to 2010, but the non-OPEC countries will increase their production by 690,000 bbl/d; the crude oil demand (worldwide) to incline by 1.4 million bbl/d in 2011 compared to 2010; and finally the onshore OECD oil stocks are expected to fall by about 20 million bbl in 2011.

This scenario shows that the delta between changes in oil supply and changes in oil demand is at -1.16 million bbl/d, i.e. the global demand will surpass the global production by 1.16 million bbl/d. This is why the oil stocks are likely to drop in 2011 and tightening the oil market which will keep the crude oil prices higher in 2011 than the prices in 2010.

In 2012 EIA expects that the worldwide oil demand is to rise by 1.6 million bbl/d; from the supply side, oil production is expected to rise in OPEC countries by 640,000 bbl/d and in non-OPEC countries will raise their production by 420,000 bbl/d compared to 2011. This means that the gap between supply and demand will be around 0.5 million bbl/d; i.e. the oil market will continue to tighten in 2012 as well.

This scenario has many variables that could affect the outcome including fiscal issues; inflation concerns etc in major economies such as US, Euro Area and China that could change the growth rate of demand for oil.


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