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Monday, January 23, 2012 - 09:53

US EIA Outlk: Oil Price To Rise As Demand Outstrips Non-OPEC


--Sees US Domestic Crude Production Rising to 6.7 Mln Bpd By 2020

WASHINGTON (MNI) - The U.S. Energy Information Administration Monday predicted that as global economic activity rebounds and capacity in the United States grows, world oil consumption will outstrip supply from producers outside of the OPEC bloc, causing oil prices to hit the $120 mark in four years.

In its 2012 Annual Energy Outlook, EIA updated projections for U.S. energy markets through 2035. It estimates domestic crude production will hit 6.7 million barrels per day by 2020, a level not seen since 1994, compared to 5.5 million bpd in 2010.

Noting that oil prices in 2011 remained in a range between $85 and $110 a barrel, the EIA said "Real imported sweet crude oil prices (2010 dollars) in the AEO2012 Reference case rise to $120 per barrel in 2016 as pipeline capacity from Cushing, Oklahoma, to the Gulf Coast increases, the world economy recovers, and global demand grows more rapidly than the available supplies of liquids from producers outside the Organization of the Petroleum Exporting Countries (OPEC)."

In 2035, the agency sees the average real price of crude oil at about $145 per barrel in 2010 dollars, or about $230 per barrel in nominal dollars.

The EIA reference case assumes limitations on access to energy resources will restrain growth of non-OPEC conventional liquids production between 2010 and 2035, and that OPEC targets a relatively constant market share of total world liquids production.

"Uncertainty regarding OPEC members' actual investment and production decisions and the degree to which non-OPEC countries and countries outside the Organization for Economic Cooperation and Development (OECD) restrict access to potentially productive resources contributes to world oil price uncertainty and the economic viability of unconventional liquids," the report said.

Motor gasoline and diesel prices are expected to rise to $4.09 and $4.49 per gallon in 2035 -- higher levels than in the 2011 Reference case -- from $2.76 and $3.00 per gallon, respectively, in 2010, the report said.

"Annual average diesel prices are higher than gasoline prices throughout the projection because of stronger global growth in demand for diesel fuel than for motor gasoline," the report said.

U.S. domestic crude oil production is expected to increase to 6.7 million bpd in 2020, 11% higher compared to last year's forecasts and a level not seen since 1994, from 5.5 million bpd in 2010, EIA estimates.

This increased production will be the result of "continued development of tight oil combined with the development of offshore Gulf of Mexico resources," the EIA said.

It added that even with a projected decline after 2020, U.S. crude oil production remains above 6.1 million bpd through 2035.

"The higher level of production results mainly from increased onshore oil production, predominantly tight oil," the EIA said.

The report said the combination of modest U.S. economic growth, increased efficiency, growing domestic production, and continued adoption of nonpetroleum liquids, will result in net petroleum imports making up a smaller share of total liquids consumption.

The report forecasts net petroleum imports as a share of total U.S. liquid fuels consumed will drop to 38% in 2020 and 36% in 2035 from 49% in 2010, in the reference case.

"U.S. dependence on imported petroleum liquids declines in the AEO2012 Reference case, primarily as a result of growth in domestic oil production of over 1 million barrels per day by 2020, an increase in biofuel use of over 1 million barrels per day crude oil equivalent by 2024, and modest growth in transportation sector demand through 2035," the EIA said.

** Market News International Washington Bureau: 202-371-2121 **

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