The International Energy Agency raised its 2011 global, crude oil demand forecast for a third month in a row on the basis of consumption gains in North America and China. Crude oil consumption worldwide is forecasted to average 88.8 million barrels a day in 2011, about 260,000 barrels more than its previous forecast.

The United States Department of Energy (EIA) said world crude oil and liquid fuels consumption grew by an estimated 2.4 million barrels per day in 2010, to 86.7 million barrels per day, the second largest annual increase in at least 30 years.

Oil price forecast

EIA expects the price of WTI crude oil to average about $93 per barrel in 2011, $14 higher than the average price last year. For 2012, EIA projects that WTI prices will continue to rise, averaging $98 per barrel. EIA’s forecast assumes U.S. real gross domestic product (GDP) grows 3.0 percent in 2011 and 2.8 percent in 2012, while world real GDP, weighted by oil consumption, grows by 3.9 percent and 4.0 percent, respectively, in 2011 and 2012.

Natural gas forecast

EIA expects that 2011 US natural gas consumption will grow 1% in 2011 to 66.8 bcfd. Total marketed natural gas production grew strongly throughout 2010, with 4.4% annual growth.

Increasing consumption, especially in the electric power segment, will contribute to higher prices and more economic incentive for producers to resume drilling – according to the EIA’s Short-Term Energy Outlook (STEO). EIA said it expects the gas market to begin to tighten in 2012, with the Henry Hub spot price increasing to an average of $4.58/MMbtu for the year.

Summary

The world consumes about 32 billion barrels (IEA) of oil per year. In recent years new discoveries from exploration efforts have averaged 7 billion barrels per year (Youngquist 2001). Major existing oil reserves are being depleted and not replaced at a rate that meets present and future consumption needs. Current production from previously discovered fields is making up the difference.

Dr. M. King Hubbert (1903-1989) is a well-known authority on the predictions and patterns of oil discovery and depletion. He worked as a researcher for Shell Oil Company and later joined the U.S. Geological Survey. He used a combination of principles of geology, geophysics and mathematics to predict future production and declines. Although his prediction in 1956 that U.S. oil production would peak about 1970 and decline thereafter was scoffed at back then, his analysis of U.S. domestic production has over time proved to be remarkably accurate. Again in 1982, Hubbert predicted that world oil production would peak sometime in 2001 to 2004.

Sources:

• United States Department of Energy (Energy Information Administration)
• International Energy Agency (Paris, France)
• Oil and Gas Journal Publication