The US Energy Information (EIA) Short Term Energy Outlook (STEO) for the month of September came out this afternoon with more startling updates on non-OPEC oil production. They cut their prediction of non-OPEC oil production again, bringing it to 20,000 barrels per day higher than in 2007 (revised from a guess of a 900,000 barrel per day increase made just seven months ago in February’s STEO). If the estimate falls next month by a similar amount to the last seven months’ cuts, we will be looking at a repeat of the oil production decrease that hit markets in 2005.
Another revision to last month’s report was to lower estimated supplies of OECD oil inventories. But since oil consumption has fallen throughout the developed world, most analysts are not yet worried about the lower inventory levels.
Hurricane Ike projections shifted south to take it away from most oil and gas rigs through late Friday. This rosier news, along with the low probability of an OPEC quota cut, led markets to drive oil’s price lower toward the $100 per barrel mark. But that low level will be tested by tomorrow’s bullish oil market report that shows the effects of Hurricane Gustav and the strengthening Hurricane Ike which will still lower Gulf output for a few days (even if it doesn’t dramatically harm the region’s rigs). I’ll give you the full news on that tomorrow.
And the STEO also shared some exciting news that the consumption of dirtier coal is projected to grow a slow .7% in 2008 and even slower in 2009, due to the strong production of cleaner natural gas and rapid construction of wind power that can replace coal as the source of new electricity demand. Here’s to further progress in the sustainable energy transition!