The markets are currently focused on the OPEC’s expected production of crude oil as the key indicator of supply and demand. There are many reasons for that, including Saudi Arabia’s record high production and the sanctions against Iran. Moreover, Libya has partially resumed its production of crude oil.
The EIA anticipates a production increase in some non-OPEC countries by 0.9M and 0.8M barrels a day in 2012 and 2013 correspondingly. Consequently, the EIA expects the tension recently seen in the global market of crude oil to ease in 2012 on higher global supply, which is expected to exceed the demand.
The overall production of crude oil and liquid fuel will increase by 1.4M barrels a day in 2012 while the global consumption will grow by 1.3M barrels a day. The consumption weakness is expected to be relatively short.
The oil production growth in non-OPEC countries is the main source of pricing uncertainty. Numerous production forecasts have failed so far due to unpredictable events.
It is mainly the Western hemisphere that is expected to contribute to the mentioned production growth. The USA, Canada and Brazil will probably increase their production by 3,25-3,4 million barrels a day in 2012-2013. The production growth in China and Kazakhstan is expected to reach 2.2-2.5M barrels a day during the same 2-year period.
According to the EIA, the USA produced 9.95M b/d in 2011. This year it is expected to increase by 2.1M b/d.
Russia is expected to reduce its production of crude oil by 1.9M and 1.2M b/d in 2012 and 2013 after the record-high level of production seen in 2011 (10,3M b/d). The Russian government lowered the export taxes, thus influencing the overall export in Q1 2011. The EIA experts assume that the lack of tax reforms and insufficient investments will press Russia’s oil production in 2012-2013.
Mexico and the North Sea are also expected to see a production slowdown (by 0.5M and 0.8M b/d correspondingly).
According to the Department of Commodity Trading of , the major factors supporting oil prices are the following:
· The USD index has sharply declined, thus stimulating the demand for consumer goods.
· The global production has grown as well, thus increasing the global consumption of energy.
· The weekly import of crude oil has reached 8.88M b/d as compared to 8.853M b/d last week.
· The refining capacity has declined by 0.4% down to 81.8%.
· Iran is still a major source of uncertainty and concerns.
The major factors pressing the prices are as follows:
· The weekly oil stocks have increased by 4.18M barrels.
· The weekly gasoline stocks have increased by 3.02M barrels.
· The demand for gasoline have declined by 1,6% (7.97M b a day).
· The OPEC has increased its oil production
The prices are currently retracing due to higher oil and gasoline stocks, weaker demand and higher production.
However, the prices are supported by the US economic growth and the embargo on Iran’s oil export.
In mid-term perspective, the price are pressed by record-high production on some OPEC countries and Russia, global economic problems and the fact that Libya has partially resumed its oil production.
