High Demand Means High Priced Oil in 2012
With crude oil demand predicted to increase by over a million barrels per day in 2012, how will the oil industry keep up with this rapidly growing need? How much more will companies need to produce? This raises a lot of questions. Paul Ausick has broken down some numbers to explain what exactly needs to happen in order to reach this growing need for crude oil.
For 2012, OPEC forecasts supply from non-OPEC producers will increase by 680,000 barrels/day to a total of 53.57 million barrels/day. The cartel notes that this level of production is “associated with a very high level of risk” due to political concerns and technological advances.
On its own behalf, OPEC produced 29.60 million barrels/day of crude oil in June. The cartel expects to average 5.29 million barrels/day in non-conventional oils and natural gas liquids, rising to 5.65 million barrels/day in 2012.
Total supply in June, according to OPEC, averaged 87.82 million barrels/day. The IEA estimate for total oil demand in 2012 is 91 million barrels/day.
There is not a chance that crude production will make up the nearly 3.2 million barrel/day increase in demand. If there is any good news in all these numbers it is that OPEC was able to increase production in June by about 500,000 barrels/day.
The IEA is also pushing back against critics of its 60 million barrel release from member countries’ strategic reserves. The agency claims that the release has narrowed the gap between prices for light, sweet crude and heavier grades. The disruption of Libyan supplies of light, sweet crude increased the price spread, forcing prices of the lighter crudes considerably higher.
The IEA also said it might consider authorizing a second release from strategic reserves. That weighed on crude prices earlier today, but comments by Federal Reserve chairman Ben Bernanke that the central bank is ready to launch another round of quantitative easing if that should be needed has boosted equities and commodities prices before noon. There’s nothing like the prospect of more free money to loosen traders wallets.
All in all, it is clear that we are going to need to find ways to further increase production by the time 2012 rolls around. The global consumption of oil is only growing, and it needs to be addressed. Hopefully, the oil industry can step up and pull this off and fulfill the needs of oil consumers.
Quotes taken from report by Paul Ausick, Read the entire article here.
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