The EIA published its Short-Term Energy Outlook (STEO) yesterday, maintaining a supply surplus for 2012 at 0.05mmb/d, fractionally down from 0.09mmb/d in the prior month.
Global demand in 2012 was revised marginally lower to 89.05mmb/d, down 0.04 mmb/d MoM, whilst non-OPEC production was cut 0.12mmb/d MoM. A lift in the EIA’s projected 2012 OPEC production helped keep supply in surplus.
The more significant adjustments came in the 2013 forecasts, where last month’s 0.6mmb/d supply surplus was cut to just 0.13mmb/d. However, this directly reflects the EIA’s assumption that OPEC production in 2013 will be cut to just 30.59mmb/d, as compared with current production of 30.8mmb/d and down 1.6% YoY.
OPEC production was flat MoM at 30.8mmb/d according to the STEO, with production gains in Angola and Iraq offset by production cuts in Nigeria (flooding and pipeline sabotage) and Iran. The EIA now puts Iranian production at 2.6mmb/d (down from 3.45mmb/d at the start of the year), though the rate of decline has eased to just 0.05mmb/d MoM. Crude available for export (production less domestic consumption) is estimated at 1.5mmb/d. In its latest report on The Availability and Price of Petroleum and Petroleum Products Produced in Countries Other Than Iran, of 25 October, the EIA acknowledges that, in recent months, Iran’s difficulties in exporting oil have eased, as customers have been able to replace insurance coverage previously procured from within the EU.
The IEA, generally regarded as the most authoritative of the major public supply/demand forecasters, publishes its Oil Market Report next week. We expect that report to indicate a higher level of market oversupply for 2012 and 2013, based on current OPEC production going forward. We continue to believe that until oversupply to the market ends price risk lies to the downside.