Prices for Brent crude oil have settled into a fairly well-defined range in the fourth quarter of 2012, moving between $106 and about $116 per barrel since early October. In the fourth quarter of 2011, both the level and the range of Brent prices were similar to current levels (Figure 1). That price environment continued into January of 2012 before prices increased sharply in February and March, resulting in the second consecutive year of substantial first-quarter crude oil price increases. However, despite the similarity between prices in the fourth quarters of 2011 and 2012, physical markets are somewhat less indicative of higher prices than at this time last year. The U.S. Energy Administration's (EIA) December 2012 Short-Term Energy Outlook (STEO) forecasts the Brent spot price to fall during the first quarter of 2013 rather than rise as it did in early 2012. For 2013 as a whole, EIA expects Brent to average $104 per barrel, an $8-per-barrel decrease from the expected 2012 annual average of $112 per barrel.
In its current STEO, EIA forecasts the call on the combination of global inventories and crude oil from the member countries of the Organization of the Petroleum Exporting Counties (OPEC) to decline through the first half of 2013. This call on inventories and OPEC production is projected to average 30.7 million barrels per day (bbl/d) in the first quarter of 2013 and fall to 29.8 million bbl/d in the second quarter, declines of 0.3 million bbl/d and 1.2 million bbl/d, respectively, from the 2012 fourth quarter. From the fourth quarter of 2011, the call on inventories and OPEC decreased only 0.5 million bbl/d to average 30.8 million bbl/d in the second quarter of 2012.
This reduction in the call on inventories and OPEC is largely the result of growing liquids production from non-OPEC members. In the December STEO, non-OPEC supply is projected to average 53.7 million bbl/d in the second quarter of 2013, about a 0.8-million-bbl/d increase from the expected fourth-quarter average. Forecast non-OPEC production growth is largely driven by expected increases in production from U.S. tight oil formations and Canadian oil sands. Last year, geopolitical events in Sudan and Syria disrupted production and non-OPEC supply was 0.2 million bbl/d lower in the second quarter of 2012 from the fourth quarter of 2011.
EIA also expects that OPEC crude oil production in the first half of 2013 will slightly outpace the combined call on inventories and OPEC crude oil production, leading to expected global inventory builds during the first half of 2013.