October’s Short Term Energy Outlook was released by the EIA yesterday and it’s full of gloomy projections.
Global oil consumption is projected to rise by about 300,000 barrels per day in 2008 and by almost 800,000 bbl/d in 2009 compared with year-earlier levels. This growth may seem large but it’s weak compared to previous estimates, last month analysts forecast 2008 consumption as 650,000.
This year demand has weakened with Motor gasoline’s projected average decline of about 200,000 bbl/d compared with last year. The gloomy economic outlook is blamed for slow demand and growth.
Supply seems to be slowing too, with non-OPEC supply growth in 2008 expected to be negative for the first time since 2005. Hurricanes Gustav and Ike shut in a total of 32 million barrels of crude oil and 165 billion cubic feet of natural gas production in the Federal Gulf of Mexico in September and the shutdown of the Baku-Tbilisi-Ceyhan further disrupted supply. Lower crude oil production is also projected for OPEC.
This year, Saudi’s higher oil production and the weak economy meant the hurricane disruptions “have not resulted in the kind of price increases that would have been expected had they occurred earlier in the year.” according to the EIA.
Unless non-OPEC supply increases, the EIA expects prices to reach $120 by April 2009 and decline to $105 by the end of that year.
This high-price outlook may clash with analysts predicting a bear market in commodities, especially oil which is currently trading at $86.55. This report at the Financial Times claims “the crude oil market could find itself “vulnerable” to a reduction in the net long position over coming weeks”. Basically, less investors expect the price of oil to increase and more expect it to decrease.
The EIA’s next report is released on the 12th of November, expect Oil Energy Money to keep you updated.
