OPEC Supply. EIA expects OPEC crude oil production to decline by 30 thousand bbl/d in 2011. This is in sharp contrast to the last Outlook, in which EIA expected total OPEC crude oil production to decline by 360 thousand bbl/d. The significant change in this Outlook for 2011 is largely due to increased production in Saudi Arabia, which rose to 9.9 million bbl/d in the third quarter of this year, compared with 9.1 million bbl/d in the second quarter. EIA maintains its assumption that about one-half of Libya's pre-disruption production will resume by the end of 2012, contributing to the overall growth in OPEC crude oil output of 270 thousand bbl/d in 2012. EIA expects that OPEC surplus crude oil production capacity fell from 4.0 million bbl/d in the fourth quarter of 2010 to 2.8 million bbl/d in the fourth quarter of 2011, but will increase to 3.5 million bbl/d by the end of 2012 as Libyan production capacity comes back on line (OPEC Surplus Crude Oil Production Capacity Chart). Forecast OPEC non-crude liquids production, which is not subject to production targets, is expected to increase by 450 thousand bbl/d in both 2011 and 2012.
OECD Petroleum Inventories. EIA expects that OECD commercial inventories will decline in both 2011 and 2012. Days of supply (total inventories divided by average daily consumption) fall slightly but remain relatively high at 58 days during the fourth quarter of 2010, 57 days during the fourth quarter 2011, and 56 days during the fourth quarter 2012 (Days of Supply of OECD Commercial Stocks Chart).
Crude Oil Prices. West Texas Intermediate (WTI) crude oil spot prices fell from an average of $97 per barrel inJuly to $86 per barrel in August and September (West Texas Intermediate Crude Oil Price Chart). The WTI spot price began October below $80 per barrel. EIA revised the projected oil price paths downward from last month's Outlook. EIA expects that the U.S. refiner average crude oil acquisition cost will average about $99 per barrel in 2011 and $98 per barrel in 2012 compared with $100 per barrel and $103 per barrel for 2011 and 2012, respectively, in last month's Outlook.
The significant price discount for WTI relative to other U.S. and world crude oils is expected to continue until transportation bottlenecks restricting the movement of crude oil out of the mid-continent region are relieved. Consequently, the projected average U.S. refiner acquisition cost of crude oil, which averaged almost $2.70 per barrel below WTI in 2010, averages about $7 per barrel above WTI in 2011 and $10 per barrel above WTI in 2012.
Energy price forecasts are highly uncertain (Market Prices and Uncertainty Report). WTI futures for December 2011 delivery over the 5-day period ending October 6 averaged $79 per barrel and implied volatility averaged 51 percent, establishing the lower and upper limits of a 95-percent confidence interval for the market's expectations of monthly average WTI prices in December of $57 per barrel and $110 per barrel, respectively. Last year at this time, WTI for December 2010 delivery averaged $83 per barrel and implied volatility averaged 30 percent. The corresponding lower and upper limits of the 95-percent confidence interval were $68 per barrel and $101 per barrel.
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