Non OPEC production will play a key role in meeting demand forecasts, despite the appearance that OPEC is willing to come to the market with additional production. Current forecasts by the IEA point to a decline in production in 2007 to 50 mb/d, compared to production of 50.8 in 2006. For 2008, production is forecast to rebound to 51 mb/d, a 2 percent increase from 2007. Assuming OPEC production, including natural gas liquids, will reach 35.8 mb/d, total oil supply should reach 86.8 mb/d.
Highlights of the non-OPEC outlook include:
- - North American production will continue to decline as decreases in Mexican production more than offset modest increases in U.S. and Canadian production. Total North American production in 2008 is expected to reach 14.14 mb/d compared to 14.22 estimated for 2007.
- - Further declines are expected in European production, reflecting declining output in the North Sea. Total OECD European output is forecast to reach 4.59 mb/d compared with 4.88 mb/d the prior year.
- - OECD production in the Pacific is expected to show modest increases led by Australia. Nevertheless there impact will be small, with total production reaching .77 mb/d in these areas.
- - One area for potential increases at the margin is the former USSR, where output is expected to increase by .4 mb/d to 13.01 mb/d. Nevertheless, the amount available for export might be restricted due to high growth and demand in these areas due to the increased oil wealth.
- - Non-OECD Asian output, which includes China, is forecast to reach 6.72 mb/d. The increase of .17 mb/d falls well short of their anticipated growth in demand.
- - One bright spot for further increases in production might be Latin America where production is forecast to reach 4.75 mb/d, an increase of .28 mb/d due primarily to increases in Brazil.
At this juncture a strong response by non-OPEC producers does not appear to be occurring. If adjustments need to be made it will likely be from the demand side.
The information and comments contained herein are provided as general commentary of market conditions and are not and should not be interpreted as trading advice or recommendation. The information and comments contained herein are not and should not be interpreted to be predictive of any future market event or condition. The information and comments contained herein is provided by ADM Investor Services, Inc. and not Archer Daniels Midland Company. Copyright © ADM Investor Services, Inc.
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