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Overview of Global Petroleum

OPEC Oil Export Revenues
 Based on projections from the EIA January 2009 Short Term Energy Outlook (STEO), members of the Organization of the Petroleum Exporting Countries (OPEC) could earn $387 billion of net oil export revenues in 2009 and $526 billion in 2010. Last year, OPEC earned $972 billion in net oil export revenues, a 42 percent increase from 2007. Saudi Arabia earned the largest share of these earnings, $288 billion, representing 30 percent of total OPEC revenues. On a per-capita basis, OPEC net oil export earning reached $2,691, a 40 percent increase from 2007.

Methodology

This report includes estimates of OPEC net oil export revenues. For each country, estimates of oil production and consumption from the latest version of the EIA STEO are used to derive net oil exports. We assume that these exports are sold at prevailing spot prices, available on the EIA website here. For countries that export several different crude varieties, we assume that the proportion of total net oil exports represented by each variety is equal to the proportion of the total domestic production represented by that variety: in other words, if we assume that Arab Medium represents 20 percent of total oil production in Saudi Arabia, then we assume that Arab Medium represents 20 percent of total net oil exports from Saudi Arabia.

Global Petroleum

Overview. The downward trend in oil prices continued in December as the worsening global economy weakened oil demand and the second Organization of Petroleum Exporting Countries (OPEC) agreement for substantial production cuts within a month has failed, thus far, to support substantially higher prices.  The outlook for supply and demand fundamentals indicates a fairly loose oil market balance over the next 2 years.  The global economic downturn points to declining oil consumption in 2009, while additional production capacity from both OPEC and non-OPEC nations should boost surplus production capacity, reducing the likelihood of a renewed strong upward pressure on prices. Global real GDP growth (weighted according to shares of world oil consumption) is assumed to be 0.6 percent in 2009 and 3.0 percent in 2010.  These projections compare with 4.6 percent real GDP growth in 2007 and 3.2 percent in 2008.  The oil price path going forward will be driven mainly by the depth and duration of the global economic downturn, the pace and timing of the recovery, and actual OPEC production.

Consumption.  World oil consumption continues to be revised downward in response to the global economic downturn.  Global consumption is estimated to have been largely unchanged in 2008 and is projected to fall by 800,000 barrels per day (bbl/d) in 2009.  Total world oil consumption is expected to record a modest rebound in 2010, rising by 880,000 bbl/d from year-earlier levels, on the assumption of the beginning of an expected recovery in global economic growth.  Oil consumption growth is concentrated in countries outside of the Organization for Economic Cooperation and Development (OECD), particularly China, the Middle East, and Latin America.  However, projected declines in oil consumption in OECD countries more than offset any non-OECD oil consumption growth in 2009 (World Oil Consumption).  If the world economic recovery happens sooner or is stronger than EIA now anticipates, oil consumption could decline at a slower rate or potentially increase at a faster rate than expected, putting upward pressure on oil prices.

Non-OPEC Supply.  Non-OPEC supply is projected to rise modestly over the next 2 years.  After falling by 340,000 bbl/d in 2008 because of project delays and disruptions in Central Asia and the Gulf of Mexico, non-OPEC supply is projected to grow by about 180,000 bbl/d in 2009 and 90,000 bbl/d in 2010.  These projections assume that unexpected delays to new non-OPEC supply that have occurred in the past will continue through the forecast period.  Supply growth in countries such as the United States, Brazil, and Azerbaijan is expected to more than compensate for continued declines in many non-OPEC nations, particularly Mexico, the North Sea, and Russia.  The global economic slowdown and falling oil prices bring additional risk to the usual uncertainties concerning non-OPEC supply growth, such as unexpected disruptions, project delays, and underestimation of decline rates.  Lower oil prices bring into doubt the viability of some high-cost non-OPEC projects, especially those utilizing nonconventional technology or those seeking to exploit frontier oil basins.  The credit crunch associated with the global economic crisis can also make it difficult to acquire financing for new projects or even finance the investment required to prevent accelerated declines at producing fields.  If conditions in global financial markets lead to delayed investment in existing and new oil fields, then even a short-lived economic downturn could have longer-term ramifications for world oil supply.  This would heighten the risk of a return to a tight supply situation once the world economy and oil demand growth recover.

OPEC Supply.  OPEC’s December announcement that it would cut crude oil production again, following its earlier cut in November, has not yet led to a substantial increase in oil prices.  Together, the two announced cuts imply a new overall target for production (excluding Iraq) of 24.845 million bbl/d , 4.2 million bbl/d below actual September production.  However, the market is not presently convinced that OPEC members will willingly curtail output enough to lead to much higher prices.  Adherence to the announced cuts will be challenging, as several individual countries are motivated to maintain production at higher levels to to generate revenue needed to finance their government programs amid falling prices.  The lack of transparency in the new agreement, highlighted by the failure to publicize individual country production cuts, is one indicator of the reluctance of countries to cut production consistent with the group’s new overall production target.  OPEC plans to meet again on March 15 in Vienna to evaluate the effectiveness of its recent actions.
 
EIA projects that total OPEC crude oil production (including Iraq) will fall by more than 2 million bbl/d, from 31.4 million bbl/d in September 2008 to 29.3 million bbl/d in the first quarter of 2009, implying a compliance rate of a little more than 50 percent. Because of Indonesia’s exit from OPEC, EIA has revised its historic and forecasted values for OPEC oil production to be consistent with the current membership.  OPEC crude oil production is expected to average 30.0  million bbl/d in 2009 and 30.7 million bbl/d in 2010.  In addition, EIA expects that OPEC production of non-crude liquids will rise substantially next year, growing by 600,000 bbl/d in 2009 and by 850,000 bbl/d in 2010.  The combination of lower demand for OPEC crude oil and the capacity expansions expected in several OPEC countries means that surplus production capacity could increase to roughly 4.0 million bbl/d in 2009 and 4.7 million bbl/d by the end of 2010, compared with the 1 to 2 million bbl/d of surplus capacity available over the past several years

source: http://www.eia.doe.gov/emeu/steo/pub/contents.html

Tags: Arab Medium, China, Export Revenues, Global Petroleum, Latin America, Middle East, oil consumption, OPEC Oil, Saudi Arabia