EIA estimates that crude oil and other liquids inventories grew by 2.0 million barrels per day (b/d) in the fourth quarter of 2016, driven by an increase in production and a significant, but seasonal, drop in consumption. Global production and consumption are both projected to increase through 2018, but consumption is expected to increase at a faster rate than production. As a result, global balances are expected to tighten.
The production increase in the fourth quarter of 2016 largely reflects members of the Organization of the Petroleum Exporting Countries (OPEC) ramping up production in advance of implementing the November agreement on production cuts. Global production is expected to have increased by 1.6 million b/d in the fourth quarter of 2016, with OPEC accounting for 0.9 million b/d, or 55%, of this increase. EIA estimates that total global production averaged 96.4 million b/d in 2016. Global production is expected to increase to 97.5 million b/d in 2017 and to 98.9 million b/d in 2018.
The large seasonal consumption declines in the fourth quarter of 2016 are not expected to continue as global consumption of petroleum and liquids is forecast to grow at a faster rate than production through 2018. Annual petroleum and liquids consumption for 2016 is estimated at 95.6 million b/d and is forecast to increase to 97.2 million b/d in 2017 and 98.7 million b/d in 2018. On a quarterly basis, consumption is expected to be greater than production in the third quarter of both 2017 and 2018, leading to stock draws in both periods.
Global inventories are expected to have increased an average of 0.9 million b/d in 2016. The January 2017 Short-Term Energy Outlook forecasts annual crude oil balances to tighten over the next two years, with 2017 averaging a 0.3 million b/d stock build and 2018 averaging a 0.1 million b/d stock build. By the second half of 2018, inventories are expected to decline by an average of 0.1 million b/d.
With annual inventory builds, along with a lack of a significant draw on existing inventories, prices remain below $60/b through the end of 2018. Brent crude oil spot prices are expected to remain fairly flat during 2017, in part as a result of the responsiveness of U.S. tight oil production to rising oil prices in late 2016, and they are expected to average $53/b for the year. EIA forecasts Brent prices will slowly increase in 2018, beginning the year at $54/b in January and ending the year at $59/b in December, averaging $56/b annually.