Supply disruptions do not support crude oil market

Recently Reuters reported its survey that 12 members of the Organization of Petroleum Exporting Countries produced 29.9 million barrels per day of crude oil in October. It was the lowest output since October 2011.  Beside this survey, other estimates by different media also have showed low OPEC productions.

A supply disruption from Libya due to labour disputes and a slower than expected recovery in Iraq that reduced supply in September due to repairs at its shipment facilities were seen as the main reasons of the low OPEC production.

The following table shows the latest forecasts of the world demand and supply of petroleum issued by the International Energy Agency, OPEC and the U.S. Energy Information Administration.

Since IEA and OPEC don't provide forecasts for OPEC crude oil production figures, differences between the global demand and the supply excluding OPEC crude oil are seen as the necessary volume of OPEC crude oil.

Necessary volumes of OPEC crude oil will remain below the 30 million bpd level between the fourth quarter of 2013 and the end of 2014, according to the IEA's prediction. Therefore, even the lowest estimation of OPEC production in October by media exceeds the necessary volume. The global petroleum market is slightly oversupply.

Meanwhile, OPEC predicts that its members' necessary crude oil output in the 4Q of 2013 at 30.49 million bpd. If the actual production in October stayed at about 30 million bpd, the global supply is in a little bit shortage.

EIA only provides forecasts for future OPEC crude oil production, but the figures seem to be too small compared to actual output in the last few quarters. If the actual output in October was at about 30 million bpd, the global petroleum supply and demand could be balanced rather than a shortage of 630,000 bpd as EIA expected.

Despite OPEC and EIA expect tight supply and demand situation in the world petroleum market, recent crude oil prices have been weaker. Although crude oil output in Libya has decreased by more than a million bpd from the production level through the first half of this year, it does not support the market well.

Crude oil supply disruption from Libya triggered the surge in the crude oil market in 2011. However, a balance of petroleum supply and demand in the North America was about 7 million bpd at that time. The region had imported that much petroleum from the overseas. But the shortage have been shrinked to below 4 million bpd due to the shale revolution. Petroleum imports in the North America region are expected to decrease below 2.5 million bpd in late 2014.

More than 3 million bpd of crude oil from the Middle East and Africa has lost the North American market and spilled out towards the other markets. Thus the necessary of OPEC crude oil has been decreasing. Supply disruptions in Libya and Nigeria no longer are strong supportive factors for the crude oil market.