U.S. Boosts 2011 Oil Forecast on Economic Outlook

(Updates with closing price in fifth paragraph. Adds Ghanem comment in 19th paragraph.)

Oct. 13 (Bloomberg) -- The U.S. increased its crude-oil price forecast for 2011 by $1 a barrel on projections that global economic growth will lead to higher demand and that inventories in industrialized nations will decline.

West Texas Intermediate oil, the U.S. benchmark grade, will average $83 a barrel next year, up from a September forecast of $82, according to the Energy Department’s monthly Short-Term Energy Outlook. The estimate includes an assumption that OPEC will boost its output as prices rise, tempering a bigger gain.

Oil will climb 6.5 percent in 2011 from a projected average of $77.97 this year, the department said. The 2010 figure increased 60 cents from last month and reflects a 26 percent advance from the 2009 average of $61.66 a barrel. Crude has averaged $77.90 a barrel so far this year in New York.

“World oil prices are expected to rise gradually as global economic growth leads to higher global oil demand and growth in non-OPEC supply slows in 2011,” according to the forecast by the Energy Information Administration, the department’s statistical arm.

Oil for November delivery rose $1.34, or 1.6 percent, to settle at $83.01 a barrel on the New York Mercantile Exchange, the highest level in a week. Futures have gained 4.6 percent this year.

U.S. Economy

U.S. gross domestic product will grow 2.6 percent this year and 2.1 percent in 2011, down from projections of 2.8 percent and 2.3 percent a month ago, according to the report.

U.S. households will spend an average of $986 between October and March to heat their homes, an increase of $24, or 2.5 percent, from last winter, EIA projected today in its Winter Fuels Outlook.

The department raised its forecast for global oil consumption this year to 86.06 million barrels a day from 85.95 million last month. That’s up 2.1 percent from last year’s 84.33 million. Demand will climb to 87.44 million in 2011, 80,000 barrels a day higher than last month’s projection.

U.S. oil use will average 18.97 million barrels a day this year, up 200,000 barrels from 2009. This year’s forecast increased 40,000 barrels from the September estimate. Consumption will climb 110,000 barrels to 19.08 million in 2011, according to the report.

OPEC Output

The 12 members of the Organization of Petroleum Exporting Countries produced an average 29.49 million barrels a day in the third quarter, up 0.4 percent from the second quarter, the report showed.

The figure was 29.41 million barrels for September, down from a revised 29.55 million the month before. The August total was the highest monthly rate since December 2008, the month before the final round of OPEC production cuts went into effect. The Energy Department put August output at 29.46 million in last month’s report.

OPEC agreed to a record 4.2-million-barrel-a-day production cut in late 2008 as global demand fell 0.6 percent, the first decline since 1983. Members are now adhering to about 54 percent of that cut, according to an estimate today from the International Energy Agency.

OPEC production will “increase over the next year or two” in response to higher economic growth, EIA Administrator Richard Newell said today at a press conference in Washington. Higher OPEC output “should keep prices from rising dramatically.”

Production Targets

OPEC oil ministers signaled that they won’t alter their existing output targets when they meet tomorrow in Vienna.

The oil market is “well balanced,” Saudi Arabian Oil Minister Ali al-Naimi said Oct. 12 when he arrived in Vienna. He called prices between $70 and $80 a barrel “ideal.”

OPEC has raised output by 5 percent from a five-year low reached in March 2009 and now exceeds its own target by 1.9 million barrels a day, about the same amount as Angola produces. Production was 29.1 million barrels a day last month, based on Bloomberg News estimates.

“All the ministers agree that we should leave the level of production stable,” Rafael Ramirez, Venezuela’s energy and oil minister, said today in Vienna. “We’re hoping to maintain the price and to increase that a little bit to between $90 and $100 a barrel.”

Oil prices “could be significantly higher” from today’s forecast if OPEC doesn’t increase production as global consumption recovers, the EIA report said.

Libya’s top oil official said he would like to see an oil price of $100 a barrel by the end of the year. Shokri Ghanem, chairman of Libya’s National Oil Corp., also called on OPEC members to comply with the group’s quotas.

IEA Forecast

The IEA also increased its demand outlook today. It raised both its 2010 and 2011 forecasts for worldwide crude use by 300,000 barrels a day amid signs of “apparently resurgent” demand in the U.S., Germany and Japan in the last quarter.

Global crude consumption will average 86.9 million barrels a day in 2010 and 88.2 million barrels a day in 2011, the Paris- based energy advisory agency said in its monthly Oil Market Report.

OPEC yesterday raised its forecast for 2010 global oil demand by 100,000 barrels a day to 85.59 million. That compares with 84.46 million last year. It said demand will climb to 86.64 million barrels a day next year.

--With assistance from Simon Lomax in Washington, Fred Pals in Vienna and Fiona MacDonald in Kuwait. Editors: Joe Link, David Marino
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.