The International Energy Agency (IEA) today released its monthly report for July. Yesterday we got OPEC’s take on the state of the oil market, and the day before that we got a take from the US Energy Information Administration (EIA) with the July revision to its Short-Term Energy Outlook.
Although the details differ slightly, the overall story remains the same. Demand for crude oil in 2012 will be lower than everyone expected at the beginning of the year, and demand in 2013 is expected to be lower still.
The single biggest reason for the decline is the weak global economy. As estimates for global growth are lowered, estimates for crude oil demand are also lowered.
Another common element from these reports is that prices for crude are expected to be lower in 2013. Growing production in North and South America is expected to add as much as 900,000 barrels/day to non-OPEC production. In a world where demand is falling, that cannot help but lower prices.
According to the IEA, OPEC is expected to produce an average of 30.5 million barrels/day in 2013, about 900,000 barrels/day less than it produced last month. OPEC’s current production also exceeds the cartel’s stated quota of 30 million barrels/day by about 1 million barrels/day.
While it is never possible to discount an unexpected and severe shock to the oil market which will send prices skyrocketing again, the current outlook for the oil market is not so good for producers and not so bad for consumers.