Released September 09, 2022 | SUGAR LAND
en
Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--The U.S. Department of Energy (DOE) lowered its forecast for global demand of petroleum and liquid fuels for 2023, largely reflecting the economic headwinds outlined by the U.S. Federal Reserve.
Policymakers in the world's major economies are raising key interest rates in order to dampen runaway inflation. With a high price for natural gas in particular, triggered in part by the Russian war on Ukraine, inflation is running at decades-long highs. For the U.S., inflation over the 12-month period ending in July was 8.5%, and the European Central Bank said it expected an 8.1% reading for full-year 2022.
The Beige Book, a U.S. Federal Reserve survey of conditions in the U.S. economy, showed that despite higher prices, demand for energy products was holding up, but that might not last. Meanwhile, supply-chain bottlenecks for some crucial components remain problematic.
"The outlook for future economic growth remained generally weak, with contacts noting expectations for further softening of demand over the next six to 12 months," the Beige Book for September read.
With that assessment, it should be no surprise that the U.S. Energy Information Administration (EIA), part of the DOE, lowered its forecast for global consumption, albeit marginally, from its August report.
The EIA estimates that global consumption of petroleum and liquid fuels will increase from last year's levels by an average of 2.1 million barrels per day (BBL/d) for 2022 and another 2 million BBL/d by next year. The forecast for 2023 was revised down by about 100,000 BBL/d from the August report, which is ironically the same volume that parties to OPEC plan to cut from production come October.
But the EIA added an interesting addendum to its statement on demand.
"As a result of high natural gas prices globally, we increased our forecast for oil consumption in 4Q22 and 1Q23 as electricity providers, particularly in Europe, may switch to oil-based generating fuels," the EIA's report read.
So-called fuel switching is prevalent in a European economy grappling with extraordinarily high natural gas prices, putting further strain on a market that could be woefully undersupplied come 2023. Most of the supply concerns relate to the pending European moratorium on Russian crude oil.
But at the same time, forecasts for U.S. crude oil production keep improving, even with the bottlenecks that Industrial Info is seeing in places such as the Permian Basin. U.S. crude oil production should average 11.8 million BBL/d this year and reach 12.6 million BBL/d in 2023, which would be a record-setter if the forecast is accurate.
That gave EIA some pause when assessing the future direction of crude oil prices.
"The possibility of petroleum supply disruptions and slower-than-expected crude oil production growth continues to create the potential for higher oil prices, while the possibility of slower-than-forecast economic growth creates the potential for lower prices," the short-term market report for September read.
Nevertheless, the EIA raised its forecast for the price of Brent crude oil, the global benchmark, from $95 per barrel on average for 2023 to $97 per barrel. And that's on the low side. Some major investment firms are predicting a return to $100+ crude oil by next year.
Manufacturing, too, is on its backfoot. The Purchasing Managers' Index for manufacturing in July was 52.8. Any reading above 50 is positive for growth, but that reading was the lowest since 2020. The situation is much worse in Europe, where the PMI dropped to 49.8.
All this, EIA's report read, contributes to "further concerns about economic conditions and petroleum demand."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).
Policymakers in the world's major economies are raising key interest rates in order to dampen runaway inflation. With a high price for natural gas in particular, triggered in part by the Russian war on Ukraine, inflation is running at decades-long highs. For the U.S., inflation over the 12-month period ending in July was 8.5%, and the European Central Bank said it expected an 8.1% reading for full-year 2022.
The Beige Book, a U.S. Federal Reserve survey of conditions in the U.S. economy, showed that despite higher prices, demand for energy products was holding up, but that might not last. Meanwhile, supply-chain bottlenecks for some crucial components remain problematic.
"The outlook for future economic growth remained generally weak, with contacts noting expectations for further softening of demand over the next six to 12 months," the Beige Book for September read.
With that assessment, it should be no surprise that the U.S. Energy Information Administration (EIA), part of the DOE, lowered its forecast for global consumption, albeit marginally, from its August report.
The EIA estimates that global consumption of petroleum and liquid fuels will increase from last year's levels by an average of 2.1 million barrels per day (BBL/d) for 2022 and another 2 million BBL/d by next year. The forecast for 2023 was revised down by about 100,000 BBL/d from the August report, which is ironically the same volume that parties to OPEC plan to cut from production come October.
But the EIA added an interesting addendum to its statement on demand.
"As a result of high natural gas prices globally, we increased our forecast for oil consumption in 4Q22 and 1Q23 as electricity providers, particularly in Europe, may switch to oil-based generating fuels," the EIA's report read.
So-called fuel switching is prevalent in a European economy grappling with extraordinarily high natural gas prices, putting further strain on a market that could be woefully undersupplied come 2023. Most of the supply concerns relate to the pending European moratorium on Russian crude oil.
But at the same time, forecasts for U.S. crude oil production keep improving, even with the bottlenecks that Industrial Info is seeing in places such as the Permian Basin. U.S. crude oil production should average 11.8 million BBL/d this year and reach 12.6 million BBL/d in 2023, which would be a record-setter if the forecast is accurate.
That gave EIA some pause when assessing the future direction of crude oil prices.
"The possibility of petroleum supply disruptions and slower-than-expected crude oil production growth continues to create the potential for higher oil prices, while the possibility of slower-than-forecast economic growth creates the potential for lower prices," the short-term market report for September read.
Nevertheless, the EIA raised its forecast for the price of Brent crude oil, the global benchmark, from $95 per barrel on average for 2023 to $97 per barrel. And that's on the low side. Some major investment firms are predicting a return to $100+ crude oil by next year.
Manufacturing, too, is on its backfoot. The Purchasing Managers' Index for manufacturing in July was 52.8. Any reading above 50 is positive for growth, but that reading was the lowest since 2020. The situation is much worse in Europe, where the PMI dropped to 49.8.
All this, EIA's report read, contributes to "further concerns about economic conditions and petroleum demand."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).
