Markets often focus on anticipated crude oil production from members of the Organization of the Petroleum Exporting Countries (OPEC) as a key driver of supply/demand tightness. Such attention is particularly understandable now, given the return of Libyan production, reports of record-high Saudi production, mixed news from Iraq (strong production growth recently and projections of more to come, tempered by political uncertainty), and now further sanctions against Iran by the United States and other countries. However, crude and liquid fuels production (crude oil, lease condensates, natural gas plant liquids, biofuels, other liquids, and refinery processing gains) in countries outside of the OPEC accounts for most of the world's production (59 percent in 2011), making prospects for non-OPEC production critical to the outlook for world oil markets.
The U.S. Energy Information Administration's (EIA) January Short-Term Energy Outlook (STEO) forecasts non-OPEC crude and liquid fuels production to grow by 0.9 million barrels per day (bbl/d) in 2012, followed by growth of 0.8 million bbl/d in 2013. Taking account of projected growth in the supply of crude and liquid fuels from both OPEC and non-OPEC suppliers, EIA anticipates the recent tightening of world oil markets will moderate somewhat in 2012, as the projected growth in supply outpaces the anticipated growth in demand. Total crude and liquid fuels production in 2012 is expected to grow by about 1.4 million bbl/d and projected demand will increase by about 1.3 million bbl/d. This easing is expected to be relatively short-lived, however, as projected consumption growth of about 1.5 million bbl/d in 2013 significantly outpaces non-OPEC supply growth in that year.
The significant forecast growth in non-OPEC crude and liquid fuels production over the next two years represents an uptick from the slower rate of growth projected in previous forecasts during 2011. The modest production increase of just 90,000 bbl/d estimated for 2011 now appears to have been a temporary dip in non-OPEC crude and liquid fuels production growth.
Because non-OPEC countries account for so much production, non-OPEC crude and liquid fuels production growth is a major source of uncertainty surrounding the outlook for oil prices, as discussed in the EIA STEO. In recent years, initial forecasts of non-OPEC production have often missed the mark by a considerable margin. These revisions have reflected inherently unpredictable events such as supply disruptions, shut-ins, and technical difficulties (such as those experienced in Syria, Yemen, and Azerbaijan), as well as the effects of better-than-expected recovery rates (as in the case of Kazakhstan) and higher-than-expected decline rates (such as in the North Sea).