USOI - Short-Term Energy Outlook February 2023

Summary

• The average annual increase in World C+C output over the 2005Q1 to 2024Q4 period (20 years) is about 473 kb/d.
• The top 10 non-OPEC oil producers as of 2022Q3 are the US, Russia, Canada, China, Brazil, Norway, Mexico, Kazakhstan, Qatar, and Oman.
• The EIA and OPEC have similar supply estimates for non-OPEC liquids plus OPEC non-crude liquids for 2023.

A guest post by D Coyne

The Short-Term Energy Outlook (STEO) was published by the US Energy Information Administration ((EIA)) on February 7, 2023. For most nations except the US and total OPEC crude oil output the forecast for future production is for total liquids only. In this month's post I will try to estimate the crude plus condensate (C+C) output indicated by the STEO total liquids estimate for the top 10 non-OPEC producers and the World minus the top 10 non-OPEC producers. I will focus on quarterly output so that we can compare it with recent OPEC estimates for World supply and demand in 2023. The estimate for C+C uses the historical output of both C+C and total liquids and uses the average of the ratio of C+C to total liquids for the past 12 quarters (2019Q4 to 2022Q3) for the top 10 non-OPEC producers (except the US where a C+C forecast is provided) and for the World minus the top 10 non-OPEC producers. In most of the charts that follow the units on the vertical axis are kb/d of C+C output.

The chart above is an exception with output in millions of barrels per day (Mb/d), the red line is historical quarterly output from the EIA and the blue shows the estimated output using the ratios based on the past 12 quarters applied to the total liquids output from 2021Q1 to 2022Q3. The estimate is fairly good, especially for the most recent two quarters of 2022 (Q2 and Q3).

The chart above shows longer-term historical data with the STEO projection starting with 2022Q4. The average annual increase in World C+C output over the 2005Q1 to 2024Q4 period (20 years) is about 473 kb/d. The linear trend line on this chart and several charts below uses ordinary least squares (OLS) regression on the data from 2005Q1 to 2024Q4 to estimate the trend. Note that over the 1984 to 2019 period, the average annual rate of increase in World C+C output was about 800 kb/d, thus the pandemic and the slow recovery for the past 3 years, plus the two years of projected output in 2023 and 2024 has substantially reduced the average annual rate of increase. In addition, if we consider the 20 years from 2000Q1 to 2019Q4 the average annual rate of increase in World C+C output was about 900 kb/d.

The top 10 non-OPEC oil producers as of 2022Q3 are the US, Russia, Canada, China, Brazil, Norway, Mexico, Kazakhstan, Qatar, and Oman. Since 2005Q1 these 10 nations will increase their collective C+C output at an average annual rate of 696 kb/d through 2024Q4 if the EIA STEO forecast proves correct. The estimate has output increasing by around 1300 kb/d from 2022Q3 to 2024Q4, output will remain just under 200 Kb/d less than the 2019 quarterly peak in the last quarter of 2024.

Over the period from 2005Q1 to 2024Q4, US C+C output increases at an average annual rate of 476 kb/d per year, very similar to the World C+C rate of increase (473 kb/d per year, see figure 2), Russian C+C output is relatively flat over the period at 39 kb/d per year (when using the least squares trend over the entire 20 year period.)

In the chart above notice that since 2019 the top 4 producers in the chart (Canada, China, Brazil, and Norway) in 2022Q3 have increasing output while the rest of the producers have relatively flat output from 2019 to 2024. (Also note that output in figures 2 through 6 are all in kb/d and the output is C+C in all 5 charts).

The chart above shows the combined C+C output of 5 non-OPEC producers (US, Canada, China, Brazil, and Norway) that have an increasing trend in output over the 2005 to 2024 period, their average annual increase in output is about 688 kb/d per year, just slightly less than the Top 10 non-OPEC producers (with an average annual increase of 696 kb/d over the same period). The rest of the World excluding these 5 nations will see an average annual decrease in output of 214 kb/d over the 2005 to 2024 period if the STEO forecast is correct. If we deduct the average annual increase from the US from the 5-nation group, we find that Canada, China, Brazil, and Norway's combined average annual increase in C+C output is about 212 kb/d, nearly balancing the decrease from the rest of the World.

The chart above considers the WTI oil price and the Henry Hub Natural Gas price forecast from the STEO (see this link for more detail.) In 2023 and 2024 the WTI price falls while natural gas prices are expected to rise after reaching a low in 2023Q1. These forecasts are revised monthly.

World Real Gross Domestic Product (which is adjusted for expected inflation) rises slowly in 2023 and grows more quickly in 2024. For greater detail see this link .

The chart above shows the growth rate for World Real GDP by quarter from 4 quarters earlier (to give an annual growth rate). More detail at this link. From 2022Q4 to 2023Q3 the annual growth rate of World Real GDP is under 2%/year and rises to over 3% per year by 2024Q2.

The EIA expects US natural gas production to rise by about 2 BCF/d from 2022Q4 to 2024Q4, details are at this link . The EIA does not forecast World natural gas production in the STEO.

A quick comparison of OPEC MOMR expected output (from February MOMR) and the February STEO from the EIA can be done for total petroleum liquids only as OPEC does not estimate C plus C output for non-OPEC producers and provides crude-only data for OPEC members (leaving out a specific condensate estimate).

OPEC has a higher estimate of World Demand for Petroleum liquids especially 2022Q4, 2023Q1, and 2023Q4, the OPEC forecast ends at 2023Q4 while the STEO forecasts to 2024Q4.

The EIA and OPEC have similar supply estimates for non-OPEC liquids plus OPEC non-crude liquids for 2023.

The difference in the "call on OPEC" which is the difference between World liquids demand and the supply of non-OPEC liquids plus OPEC non-crude liquids is mostly due to the different demand estimates. The EIA also forecasts that OPEC will produce more than is needed to balance supply and demand in 2023 and 2024. If the STEO forecast is correct, it suggests a build in World oil stocks over the next 2 years.

Original Post

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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