Here is the Short-Term Energy Outlook of Global Petroleum published on June 10, 2008 by Energy Information Administration (EIA)
(Next Update: July 8, 2008)
Source: EIA

The combination of rising consumption, further downward revisions in the supply outlook for countries outside of the Organization of the Petroleum Exporting Countries (OPEC), and low surplus production capacity reinforce the perception that supply is having a difficult time keeping up with demand growth, accounting for much of the upward trend in oil prices.  Consumption in countries outside of the Organization for Economic Cooperation and Development (OECD) continues to grow rapidly, offsetting weaker consumption in OECD countries, especially the United States.  Declining production in a number of non-OPEC nations, including Mexico, United Kingdom, and Norway, is largely offsetting increases in other countries.  Slow growth in non-OPEC supply is coinciding with disruptions in supplies from some OPEC countries, such as Nigeria.  Ongoing geopolitical concerns in several producing countries, including Venezuela and Iran, have contributed to oil price volatility.

The market remains concerned that the cushion of surplus production capacity of less than 2 million bbl/d (almost all located in Saudi Arabia) and/or stocks is insufficient to protect against possible changes in supply or consumption, especially as we enter the summer hurricane season.  The absence of a Saudi commitment to add capacity beyond its current goal of 12.5 million bbl/d adds to the uncertainty about the adequacy of future supply capacity growth.

Consumption. Preliminary data indicate global oil consumption rose by about 630,000 bbl/d during the first quarter of 2008 compared with year-earlier levels, much lower than the 1.0-million-bbl/d growth expected in the previous Outlook.  Most of this downward revision occurred in the OECD countries.  With this revision, OECD consumption during the first quarter is estimated to have fallen by 460,000 bbl/d from year-earlier levels, with the declines concentrated in the United States.  Consumption in the other OECD regions was flat during the first quarter, with European consumption increasing relative to year-earlier levels only because warmer-than-normal weather led to unseasonably low consumption in first quarter of 2007.  OECD consumption is projected to decrease by 240,000 bbl/d in 2008 and increase slightly in 2009.

In contrast, consumption in the non-OECD countries is projected to grow by 1.2 million bbl/d in 2008, led by China, India, and the Middle East (World Oil Consumption).  Continued economic growth, fuel subsidies, and increased oil-fired power generation are supporting increases in non-OECD oil consumption.  Efforts to ease subsidies in some non-OECD Asian nations such as India and Indonesia could eventually lead to higher prices in those countries and lower overall non-OECD consumption growth.  However, China represents the single largest source of world oil consumption growth in our forecast, and that country has not yet begun to remove price subsidies.

Non-OPEC Supply.  Non-OPEC supply growth remains weak despite 6 years of rising prices.  Non-OPEC production is expected to rise by 310,000 bbl/d in 2008, down sharply from last month's Outlook.  Actual production data from Russia, Norway, and Mexico, along with lowered expectations for Brazil, are the principal reasons for the downward revision.  Non-OPEC supply during the first quarter of the year was 240,000 bbl/d lower than the first quarter of 2007, and the second quarter of 2008 is expected to be 200,000 bbl/d lower than last year.  As a result, virtually all of the growth in non-OPEC supply is expected in the second half of the year, with an expected year-over-year increase of 820,000 bbl/d, driven by growth in Brazil and Azerbaijan (Non-OPEC Oil Production Growth).  EIA has also revised its estimates of non-OPEC supply growth downwards in 2009 to 1.1 million bbl/d, slightly below expected consumption growth for the year.  Given recent history, EIA believes that the pace and timing of non-OPEC supply growth will continue to be subject to possible delays in key projects and accelerating production declines in some older fields.  As a result, net production gains could be less than the current forecast, leading to a higher price path.

OPEC Supply OPEC crude oil production is projected to average 36.9 million bbl/d in the second quarter, 140,000 bbl/d higher than first quarter levels.  Over the quarter, lower production in Nigeria, due to security problems and a workers strike, was offset by higher Iraqi and Saudi production.  Saudi Arabia reportedly increased output in mid-May by 300,000 bbl/d, with production expected to reach 9.4 million bbl/d in June.  At these production levels, global surplus production capacity, virtually all of which is in Saudi Arabia, should be about 1.4 million bbl/d in June (OPEC Surplus Oil Production Capacity).  OPEC crude oil production is expected to increase during the third quarter of 2008, although this is dependent upon how the security situation in Iraq and Nigeria evolves.  Iraq plans to raise exports from the north by about 100,000 bbl/d in June if security conditions permit.

Inventories.  OECD commercial inventories fell in the first quarter of 2008 by about 430,000 bbl/d, in line with the 5-year average decline during that part of the year.  At the end of the first quarter, OECD commercial inventories stood at 2.54 billion barrels, 18 million barrels above the 5-year average and equal to 53 days of forward consumption.  However, OECD stock additions during the second quarter are projected to be far below the average 5-year build, with OECD commercial inventories staying at or below their 5-year average for the remainder of the year (Days of Supply of OECD Commercial Stocks).

"The way to make money is to buy when blood is running in the streets."
~ John D. Rockefeller

 

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