The Energy Information Administration (EIA) recently released its short-term outlook for the month of February 2014 and has forecast that the global crude oil output will average 91.68 million barrels per day (bblpd) during 2014 while the number will grow to over 93 million bblpd in 2015. However, the EIA recognizes the limitation of its estimates as changing global political and geographical circumstances dictate the output and can mean significant variance between actual numbers and projections.
EIA: Extreme weather shrunk output this winter
“Temperatures east of the Rocky Mountains have been significantly colder this winter (October – January) compared with the same period both last winter and the previous 10-year average, putting upward pressure on consumption and prices of fuels used for space heating. U.S. average heating degree days were 12% higher than last winter (indicating colder weather) and 8% above the previous 10-year average. The Northeast was 11% colder than last winter, the Midwest 17% colder, and the South 20% colder, while the West was 3% warmer,” reports the EIA.
Such weather conditions not only halted the drilling activities in certain regions, they also contributed to a significant uptick in prices of heating fuel. “While the North Sea Brent crude oil monthly average spot price fell by almost USD 3 per barrel (bbl) from December to January, cold temperatures have tightened heating oil supplies and helped drive up retail prices. Weekly U.S. residential heating oil prices increased by USD 0.14/gal between the end of December and end of January. Despite the recent increases, EIA expects that U.S. heating oil prices will average USD 3.82/gal this winter, USD 0.05/gal (1%) lower than during last year’s winter heating season,” elaborated the EIA.
Supply disturbances due to political mishaps
During 2013, the EIA forecasted the supply to grow by 1.0 million bblpd but the supply only expanded by 0.6 million bblpd. This was primarily caused by unplanned supply disruptions among OPEC countries and some disturbances in the non-OPEC countries. Disruptions across Libya, Iran, Nigeria and Iraq accounted for volume shrinkages worth 0.7 million bblpd, 0.6 million bblpd, 0.3 million bblpd and 0.2 million bblpd respectively.
Furthermore, non-OPEC suppliers experienced production shortfalls in 2013 which shrunk global output by 0.9 million bblpd. Sudan and South Sudan, Syria, and Yemen accounted for 70% of the total non-OPEC supply disturbances. However, the EIA admits that “planned disruptions as a result of maintenance can also be unpredictable as complications can extend the maintenance period, reducing production by a greater amount than expected.”
What lies ahead
EIA forecasts the global liquid fuels volume to grow by 1.7 million bblpd during 2014 and 1.4 million bblpd in 2015. 2014 growth is mostly attributed to growing shale output from the US while the OPEC suppliers are expected to experience a decline in their output by almost 0.2 million bblpd. In 2015, this oil boom in the US is expected to slow down and the OPEC output will decline by 0.1 million bblpd during the year.