The situation in the global market of crude oil is still tense, especially in the light of the recent events in the Middle East and North Africa, which is the world’s biggest oil-production area. The current situation in Libya keeps destabilizing the global market: in 7 weeks of the civil war the production of crude oil in Libya has declined from 1.6M down to 250-300K barrels per day. By now it is unclear how long the situation will last. The rebels and the Kaddafi’s army blame each other for firing at oilfields.
It appears that some Libyan oilfields become assault targets, which raises concerns as the market may lose even more oil for a long time. For example, Kuwait needed 2 years to completely resume the production of oil after the Gulf War in 1991.
The forecast for the global consumption of crude oil grows every year.
The supplies from the oil-exporting countries, which are not the OPEC members, will increase by 0.2M barrels a day in 2011 and then will decline a little in 2012. The U.S. Energy Information Administration (EIA) expects that the growing consumption will be compensated by the stocks and the OPEC’s growing production. It is expected that the oil stocks of the Organization for Economic Co-operation and Development (OECD) will decline by the end of 2012.
The consumption of crude oil increased by 2.4M b/d in 2010 (86.7M b/d). The EIA expects that the global consumption will grow by 1.5M b/d in 2011 and by 1.7m b/d in 2012.
The non-OECD members will make up almost the entire consumption growth within the next 2 years (China, Brazil and the Middle East). The EIA expects that North America will be the only region of the OECD to show an increase in the consumption of crude oil over the next 2 years.
The oil production of the non-OPEC members
According to the EIA, the production of crude oil in the non-OPEC countries will gain 170K b/d in 2011 and then will slightly decline in 2012. China and Brazil are expected to increase the oil production by 140 000 and 170 000 b/d correspondingly. In 2012 Canada will probably produce 170K b/d while China and Brazil will increase their production by 140 000 and 110 000 b/d correspondingly. However, Mexico’s production of crude oil is expected to decline by 220 000 b/d in 2011 and 80 000 b/d in 2012. According to the EIA forecast, the CIS states will increase the production by 320 000 b/d in 2011 and will decrease it by 180 000 b/d in 2012. The production of crude oil in the US is expected to be expanded by 100 000 b/d in 2011 and by 160 000 b/d in 2012.
The production of crude oil in the OPEC countries.
The EIA anticipates that the production decline in Libya will be compensated by the stocks and growing production in the other OPEC countries.
The growing global consumption of crude oil and the restrained supplies from Libya are expected to make the OPEC countries increase their production by 1.9M b/d in 2012.
The crude oil stocks in the OECD countries.
The OECD oil stocks are expected to decline by 111M barrels in 2011 and by 38M barrels in 2012.
The factors that may influence crude oil are the Middle East situation, the decisions made by the OPEC members and the pace of economic recovery.
At the moment the market of crude oil is seeing a correction movement after Friday’s rally. It is reported that Muammar Kaddafi has finally agreed to the plan of conflict settlement offered by the African Union, including cease-fire. However, the opposition will agree to cooperate only if Kaddafi abandons power. The news was the driver for the recent price decline as the rally wasn’t supported by facts any more (only by supply concerns).
At the weekend Saudi Arabia announced that it was ready to produce 12.5M b/d if there is an urgent need. This fact should also be taken into account. Consequently, the concerns over the crude oil supplies may significantly decline in the short run, causing a price correction. The WTI price is most likely to keep moving within the $100-110/b price range. There are no significant fundamental reasons for any major price changes.
The Department of Commodity Trading,
