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World oil demand expected to grow 1.7 percent in May Organization of Petroleum Exporting Countries expected to slowly increase crude oil production; tight storage affecting U.S. natural gas prices Petroleum News Alaska
The U.S. Department of Energy’s Energy Information Administration said May 8 that it assumes the Organization of Petroleum Exporting Countries (excluding Iraq) will produce an average of 25.2 million barrels of crude of in the second quarter, 0.9 million barrels per day above first quarter production levels, about 0.5 million barrels per day above the group’s production target of 24.69 million barrels per day.
The agency said its forecast then assumes another 0.1 million barrels per day increase in OPEC 10 (excluding Iraq) crude oil production in the third quarter and an additional 0.5 million barrel per day increase in the fourth quarter of 2000. If OPEC fails to increase production in the third or fourth quarters of 2000 as assumed in the forecast, the agency said, higher oil prices would be expected. Continued steady production increases are expected throughout 2001.
Iraqi crude oil production is assumed to average more than 2.3 million barrels per day in the first quarter of 2000 and increase through the remainder of the year to average about 3.0 million barrels per day in the fourth quarter of 2000.
Non-OPEC production is expected to increase by 0.6 million barrels per day in 2000 and by another 0.9 million barrels per day in 2001, primarily from the North Sea, Mexico, South America and Africa .
Demand expected to grow at 1.7 percent The agency said its May forecast assumes growth in world oil demand in 2000 of 1.3 million barrels per day (about 1.7 percent), to average nearly 76 million barrels per day. In 1999, world oil demand grew by 1.0 million barrels per day (1.4 percent). World oil demand growth in 2000 and 2001 is expected to be much less than the 1.5 million to 2.0 million barrels per day growth that was seen in the 1995-1997 period.
The United States, which accounted for more than half of the growth in world oil demand in 1998 and 1999, is expected to supply about 8 percent of world oil demand growth in 2000 and about 23 percent in 2001. As Asia continues to recover from the economic crisis of 1997-1998, it is expected to once again become an important engine for world oil demand growth. However, overall demand growth in 2000 is expected to be slowed by high oil prices, even for a relatively inelastic commodity such as oil. By 2001, oil demand is expected to grow substantially, increasing by nearly 1.9 million barrels per day to nearly 78 million barrels per day.
In 1999, world oil demand growth was mainly due to growth in OECD countries, particularly the United States. In 2000, non-OECD Asia is expected to once again be the predominant region for oil demand growth, although growing much less than before the economic crisis as it may take some time before many Asian economies fully recover.
By 2001, not only is non-OECD oil demand expected to grow even more, but OECD oil demand growth is expected to be strong as well .
Tight storage drives up natural gas prices Natural gas prices at the wellhead are projected to increase by more than 50 cents per thousand cubic feet this year compared to last year, the EIA said. Spot prices have been rising since January in response not only to the sharp jump in oil prices, but primarily due to the tight storage situation.
Underground storage levels are currently about 5 percent below year-ago levels, putting upward pressure on the price as we enter the injection season. Wellhead gas prices are poised to continue to increase through the summer and into next winter as gas demand growth in the industrial and electric utility sectors is projected to outstrip production gains.
Natural gas is projected to maintain its price advantage over residual fuel oil as a fuel input for electric utility generation through the year 2000. Next year, the advantage for gas is expected to disappear as gas prices continue to climb while oil prices continue their projected downward slope.
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