The International Energy Agency (IEA) is now forecasting global oil demand growth of some 1.1 million barrels (MMbbl.) per day in 2012, down from 1.3 MMbbl. per day reported in its December forecast, according to Adam Sieminski, research analyst at Deutshce Bank, in a recent report. An exceptionally precarious economic backdrop in fourth-quarter 2011 saw oil consumption return to a declining trend, according to the IEA.
“With baseline weakness in 2011 feeding through into 2012, along with preliminary indications of seasonal weakness in January, the IEA’s demand estimates for 2012 are now falling faster than non-OPEC supply estimates,” writes Sieminski. “According to the IEA, Middle East unrest and unplanned outages, particularly in the North Sea, limited annual growth in non-OPEC supply to only 45,000 bbl. per day in 2011.”
IEA estimate some 600,000 to 700,000 bbl. per day of non-OPEC supply disruptions between second-quarter 2011 and fourth-quarter 2011. It is expecting a strong 340,000 bbl. per day rebound this quarter and 1 MMbbl. per day of growth, on average, for all of 2012.
Libyan losses take this number higher, writes Sieminski. The focus for geopolitical risks has shifted to Nigeria, Iraq and “most pressingly,” Iran. Some analysts might cut oil price forecasts for this year and the next due to perceptions of good news on U.S. supply and negative news on the global economy.
“In our view, geopolitical risks to supply are potentially greater in 2012 than they were in 2011, and the world economy (and oil demand) should be in better shape by 2013”
On the natural gas front, a report was released by the U.S. Department of Energy on the effects of U.S. liquefied natural gas exports. The EIA’s reference case estimates that high (12 billion cubic feet per day) exports will result in a $1.58 per thousand cubic feet increase in wellhead gas prices by 2018. In 2014, the price of $4.39 per thousand cubic feet could rise some 36% to $5.97.
The EIA notes that natural gas price increases at the consumer level would be less than 10% over the 2015 through 2035 period, even in the worst case of high exports and low resource recovery, and could be as little as 3%.
Meanwhile, consumer electricity bills would go up 1% to 3%, according to the EIA. The agency announced a draw of 87 billion cubic feet for the week ending January 13. This was larger (more bullish) than consensus expectations, but woefully short of the 162 billion cubic feet draw that is historically typical for the week. Total gas in storage is now 539 billion cubic feet higher than last year at this time and 566 billion cubic feet above the 5-year average, according to EIA statistics, reports Sieminski. The larger-than-expected draw is insufficient to offset growing concerns about the end-of-season storage projections.
“Our Houston analytics desk has a current end-of-season forecast for 2082 billion cubic feet because they are starting to build shut-in into their calculations.” The bank assumes 7-year average draws and 1billion cubic feet per day of shut-ins and ends at 2,200 billion cubic feet.
Recommended Reading
Sempra on Track to FID Texas Port Arthur LNG Export Plant in Q1
2023-02-28 - Sempra Energy and U.S. construction firm Bechtel have an engineering, procurement and construction contract worth approximately $10.5 billion for the development of the Port Arthur LNG plant.
Shell LNG Outlook Highlights Risks to US Gas Market
2023-02-28 - Shell Plc said the rising role for U.S. supply in the global LNG market will increase exposure to U.S. gas market risks, the European energy major announced in its LNG Outlook 2023.
Wave of New LNG Export Plants Threatens to Knock Gas Prices
2023-03-14 - "When you hear people say 'there is no way we will overbuild this,' that's when things get over-built," said Alan Armstrong, CEO of U.S. gas pipeline operator Williams Cos., which supplies gas to LNG exporters.
Natgas Stops Flowing to Freeport LNG Export Plant in Texas
2023-02-07 - The plant is not expected to return to full power until at least March and is still waiting for permission from federal regulators to start loading LNG on ships to free up storage tank space.
Freeport LNG Seeks US Approval to Restart Loading at Texas Export Plant
2023-02-03 - "Reinstatement of Dock 1 LNG loading services will allow Freeport to recommence normal LNG ship dockage and loading operations," according to the company's U.S. Federal Energy Regulatory Commission filing.