The EIA’s new 2014 outlook notes that potential new supplies of oil from tight and shale resources have raised optimism for significant new sources of global liquids. It also noted that the potential for demand growth for liquid fuels is focused on the emerging economies of China, India and the Middle East. Here is the kicker: the EIA suggests that liquid fuels demand in the United States, Europe and other regions with well-established oil markets seems to have peaked.
After a long period of sustained high oil prices, improvements in conservation and efficiency have reduced or slowed the growth of liquid fuels use among mature oil consumers. The changes in the overall market environment have led the EIA to focus on reassessing long-term trends in liquid fuels markets for this latest outlook.
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The new take is that higher sustained world oil prices, advances in extraction technologies and growing supplies from the United States have brought new resources to market. And Mexico is hoped for as a new source of production, with Brazil, Argentina and elsewhere acting as potential sources.
Some of the assumptions for demand trends are as follows:
- EIA expects the WTI-Brent discount to continue to decrease over time and will continue to report WTI prices. The U.S. Commerce Department’s Bureau of Industry and Security allowing exports of some lease condensates after processing also has the potential to further reduce the spread.
- U.S. oil is projected to average $98.28 per barrel in 2014 and $94.67 per barrel in 2015 (versus $100.45 and $96.08 previous, respectively).
- Brent is expected to average $106 in 2014 and $103 in 2015, down from $108.11 and $105 (respectively).
U.S. production hit 8.6 million barrels a day in August. This was the highest since July of 1986. EIA forecasts for U.S. production now as follows:
- 8.53 million barrels per day in 2014, up from 8.46 million prior forecast
- 9.53 million barrels per day in 2015; up from 9.28 million prior forecast
- U.S. now expected to be responsible for nine out of every 10 new barrels of global production
The international consumption estimate is being cut:
- Down to 91.55 million barrels per day in 2014, versus 91.56 million prior
- Down to 92.89 million barrels per day in 2015, versus 92.96 million prior
- OPEC expected to reduce to reduce output in 2014 at 35.77 million barrels per day in 2014, versus prior forecast of 35.84 million
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