Other Oil Macro
Leading energy agencies and consultants have been raising their 2010-11 demand forecasts, now averaging about 1.6 million b/d growth, versus 1.4 mmb/d earlier this year. And for the first time in awhile, they have NOT been cutting their nonOPEC outlook. However, after a several year hold in new projects, the nonOPEC supply fundamentals are already strained. This year’s nonOPEC growth forecast, around 700 kbd, is comprised of 300 kbd from Russia (new field startups) and 600 kbd from NGLs, essentially OPEC output which does not fall into the OPEC quota system. In other words, outside OPEC NGLs and the cresting (absent material change to fiscal terms, see below) Russian environment, ongoing nonOPEC production will fall 200 kbd in 2010, and, at best, will be flat next year. Amidst seasonal and Euro-frenzied weakness, and including potential delays while debating and implementing tightening safety and spill-response, the intermediate term fundamental outlook for oil seems increasingly bullish. That said, US inventories appear to be building again, both at key storage hubs and along major pipelines, some of which have slowed nominations due to overloading.