EU sanctions, including an embargo on Iranian crude and an insurance ban on tankers carrying Iranian oil, became fully effective on July 1, shortly after the latest set of U.S. sanctions entered into force. The United States issued exceptions to all major importers of Iranian oil from sanctions that could have been imposed on foreign financial institutions which facilitated oil-related transactions with the Central Bank of Iran, but only after they had demonstrated or pledged significant reductions in their purchases of Iranian crude oil. The complete market effects of these sanctions are unknown and difficult to disentangle from previous rounds of sanctions, but EIA believes that most of their current and expected effects on Iranian oil supplies have already been priced into the global oil market. Despite the market's mild reaction to the sanction start dates, upside price risks still persist, particularly if negotiations with Iran fail to progress.
Global Crude Oil and Liquid Fuels Consumption
World liquid fuels consumption grew by an estimated 0.8 million bbl/d in 2011. EIA expects consumption growth of 0.7 million bbl/d in both 2012 and 2013, with China, the Middle East, Central and South America, and other countries outside of the Organization for Economic Cooperation and Development (OECD) accounting for essentially all consumption growth (World Liquid Fuels Consumption Chart). Projected OECD liquid fuels consumption declines by 0.5 million bbl/d in 2012 and a further 0.3 million bbd/d in 2013.
In the third quarter of 2012, world demand will reach its seasonal peak, reflecting both the U.S. driving season and increased oil use for electricity generation in the Middle East. Projected consumption exceeds production by 0.7 million bbl/d, leading to global stock draws. Given overall lower demand expectations, the impact of seasonality on the tightness of global oil markets is expected to be substantially less than in 2010 or 2011, when third-quarter consumption outpaced supply by 1.5 million bbl/d and 1.8 million bbl/d, respectively.
EIA expects crude oil and liquid fuels production by non-Organization of the Petroleum Exporting Countries (OPEC) to rise by 0.8 million bbl/d in 2012, and by a further 1.3 million bbl/d in 2013. The largest area of non-OPEC growth is North America, where production increases by 880 thousand bbl/d and 540 thousand bbl/d in 2012 and 2013, respectively, resulting from continued production growth from U.S. onshore shale and other tight oil formations and from Canadian oil sands. EIA expects that Kazakhstan, which will commence commercial production in the Kashagan field next year, will increase its total production by 170 thousand bbl/d in 2013. In Brazil, output is projected to rise by 120 thousand bbl/d in 2013, with increased output from its offshore, pre-salt oil fields. Forecast production also rises in China, Russia, and Colombia over the next two years, while production declines in Mexico and the North Sea.