OPEC, EIA reports offer 2018 price, supply, demand insights

By Staff | September 12, 2017

New reports released this week from the Organization of Petroleum Exporting Countries and the U.S. Energy Information Administration provide oil pricing and supply forecasts through 2018 but offer little information regarding the impact of two major hurricanes that hit the U.S. recently along the Gulf Coast.

In OPEC’s monthly oil market report, the organization offered an update on the amount of oil production expected this year and next. In 2017, OPEC believes it will produce 32.7mb/d—roughly 500,000 b/d higher than its 2016 production totals. Next year, OPEC expects to add another 200,000 b/d to its total production volumes, bringing its yearly average in 2018 to 32.8 mb/d.

The U.S. will produce near-record levels this year at 9.3 mb/d. Next year, however, the U.S. will topple a production record of 9.6 mb/d set in 1970 when it reaches 9.8 mb/d on average for the year.

According to OPEC, world demand growth could increase enough to handle the increases in production that will take place next year between the U.S. and OPEC. As a result of better-than-expected performance from North American and European countries this year, OPEC believes oil demand growth will be higher by 50,000 b/d for Q2 demand. Next year, global oil demand growth will rise by just over 1.3mb/d, bringing the world’s daily total to 98.12 mb/d.

Part of the growing demand for oil this year and next year is due to economic growth expected in several countries. The U.S. and the Euro-zone should rise in growth by 2 percent next year. India will grow by 7.5 percent next year, Brazil and Russia will rebound and grow at 1.5 percent in 2018 and China will grow at 6.3 percent next year.

“Global economic growth momentum has gained traction lately and has become more balanced, with all major economies now showing positive growth this year, a trend that is forecast to continue into 2018,” OPEC said in its report.

Although the EIA said it was too early to realize the impacts of Hurricane Harvey—and too late to include any attained information in its Short-Term Energy Outlook—it did offer some facts. The oil demand by Gulf Coast refineries has declined in the wake of Harvey, as many operations had to curtail or shut-down production temporarily. According to the EIA, the lower refinery demand for crude oil and limited ability to move crude oil resulted in crude oil inventory builds at Cushing, Oklahoma, and the Gulf Coast of 800,000 barrels and 1.7 million barrels respectively as of Friday, September 1.

Some producers in West Texas’ Permian or South Texas’ Eagle Ford may urge the Port of Corpus Christi or others to expedite the recovery efforts of their port infrastructure capable of moving light tight oil from the state’s shale plays. The EIA said Brent and WTI future prices rose to $5/b at the end of August, “which reflects lower refinery demand in the U.S. crude oil market.” The spread could push U.S. producers to find more export opportunities for U.S. crude. The spread between Brent and WTI should decrease by more than half in November, leveling out at $2/b.

The strength of the U.S. dollar—which plays a role in the price of oil (a stronger U.S. dollar drives the price of oil down)—is on a slight decline trend, EIA also said.

And, according to OPEC, year-to-date estimates show crude futures prices are more than 20 percent higher this year than last.