Oil prices rallied in February: WTI and Brent appreciated by $9 and $10 a barrel correspondingly. Geopolitical events were the main market drivers since Feb 2011, when the civil war in Libya broke out. Since then many oil companies announce a production decline (read ThisWeekInPetroleum - March 23, 2011, September 14, 2011, and December 7, 2011). Libyan oil supplies are gradually returning to the global market of crude oil. However, the disruption of oil supplies from Iran, South Sudan, Yemen and Syria has been influencing the market since January.
South Sudan suspended its oil production by 90% in late January due to another breakdown in talks between Sudan and South Sudan. They still cannot agree on the oil transit prices. According to the Energy Information Administration (EIA), the total production of crude oil in Sudan and South Sudan is expected to decline by 200K b/d in 2012. The production will recover only in 2013 (370K b/d). The civil conflict affects the oil production as well. According to the EIA, Yemen’s total production of crude oil will reach 180k b/d in 2012 and 200K b/d in 2013 against the pre-crisis 260k b/d.
As for Syria, the production and supply problems intensified after the main pipeline was damaged. The EIA expects Syria’s oil production to decline down to260K b/d in 2012. The country’s oil industry will recover next year (360K b/d). Still, the current events in Sudan, Yemen and Syria have had less considerable impact on the global market of crude oil than last year’s Libyan events. Another factor is tensions over Iran.
The EIA’s report released on March 6th suggests that an increase in the global consumption of crude oil will determine the production growth in non-OPEC countries. The global consumption of liquid fuels will reach 1.1M b/d in 2012 and 1.4M b/d in 2013. The supply from non-OPEC countries will increase by 0.7M b/d in 2012 and 0.8M b/d in 2013. In order to satisfy the global demand, the global market of crude oil will rely on the OPEC.
The global consumption of liquid fuels increased by 0.8M b/d in 2011. The EIA expects it to accelerate within the next 2 years to reach 89M b/d in 2012 and 90.3M b/d in 2013. China, Middle East countries and Central America and South Africa will be the biggest consumers this year. In other words, non-OECD members will account for the entire consumption growth over the next 2 years.
According to the EIA, last year’s crude oil stocks of the Organization for Economic Co-operation and Development (OECD) were equal to 2.64B barrels. By late 2013 they will decline down to 2.57B barrels.
OPEC members will increase their oil production by 490K b/d in 2012 and 560K b/d in 2013. The forecast doesn’t take into account the embargo and sanctions against Iran.
The production of crude oil by non-OPEC members will increase by 690K b/d and 750K b/d in 2012 and 2013 correspondingly. North America will show the biggest growth – 360K b/d. Brazil will increase its oil production by 120K b/d. China and Columbia will do the same while Russia and Mexico will see their oil production declining a little.
The EIA anticipates much higher oil prices in 2012 as opposed to the previous forecast. For example, the forecast for WTI was increased from $100/b up to $106/b.
According to the Commodity Trading Department of , in short-term perspective, oil prices will be supported by numerous tensions in the Middle East and optimism over the Greek bond swap.
In mid-term perspective, oil prices will fall under pressure due to Russia and OPEC’s record-high oil production, supplies from Libya and China’s economic slowdown.
