Global highlights (oil ):

The springtime slump in oil markets accelerated in May in the wake of the deepening euro zone crisis, mounting concern over a slowdown in Chinese growth and rising global oil supplies. Futures prices were off 20% from peak 2012 levels, with Brent last trading at around $97.50/bbl and WTI at $83.50/bbl. Global oil supply rose by 0.2 mb/d to 91.1 mb/d in May. NonOPEC liquids increased by 0.2 mb/d to 53.1 mb/d and by 1.0 mb/d versus year ago. In 2012 rising North American supply more than offsets recordlow North Sea output, as well as outages in the Sudans, Syria, and Yemen, taking nonOPEC supply growth to 0.7 mb/d. OPEC crude supply edged lower in May, off 20 kb/d, to 31.87 mb/d, with reduced output from Saudi Arabia and Iraq offset by higher production in Angola, Nigeria, and Libya. The call on OPEC crude and stock change in 2H12 is around 1 mb/d higher than the 1H12 level, at 30.9 mb/d. OPEC 2012 NGL supply rises 0.4 mb/d to 6.2 mb/d. OECD industry oil inventories rose by 17.3 mb in April, to 26.43 mb. World refinery crude demand is set to surge seasonally by 2.8 mb/d between Aprils low and August, as maintenance winds down. New and returning capacity in Asia and Europe also contribute, while ramp up at Motivas expanded US plant could be delayed. Global crude runs rise from 74.3 mb/d in 2Q12 to 75.9 mb/d in 3Q12.

World oil consumption

Global oil consumption has remained flat over the past few years and stood at 4059.1 million tonnes of oil equivalent (mtoe) in CY11 primarily due to the negative impact of the global economic cues i.e, Euro zone crisis, slow down in Chinese economic growth and earlier economic slowdown during CY08-09. Currently, America, Europe and Eurasia contribute 54.54% of the world oil consumption, followed by Asia-Pacific, which contributes 32.42% of the world oil consumption and rest consumed by middle east & Africa, which contributes 13.04%. we are expecting global oil consumption increase by 0.6542% y-o-y and our estimate for CY12 & CY13 are 4084.8, 4111.3 respectively.
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Source: BP Statistical review 2012

World oil production:

Only 1.3% increase in world production of oil from 2010 to 2011 and stood at 3995.6 million tonnes of oil equivalent (mtoe) in CY11. A steep cut in supply from Africa majorly Libya (about -71% y-o-y cut in supply) due to political and economic instability. On other hand, middle east majorly by Saudi Arabia (12.7% y-o-y) and United Arab Emirates (14.2% Y-O-Y) try to compensate for the loss of supply and stabilize prices but it fails to provided period of time and other the same light- sweet crude oil that Libya produces. Now Libya is trying to come back on track and according to IEA estimate Libya production increase up to 1.17 million bpd by the end of 2012. Other concern is decline in supply from Iraq as Obama administration wants China, India and 10 other nations to present plans detailing how they will curtail Iranian oil imports. If a country doesnt prove its making necessary reduction by the end of June, any institution in that nation that settles petroleum trades through Iraqs central bank will be cut off from U.S Banking system. Overall we are expecting production of oil remain stable as some decline in supply from Iraq but increment in supply from Libya offset the imbalance. The estimated production growth rate by BP is 0.05871% y-o-y.
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Source: BP Statistical review 2012

Brent crude prices to trade at US$112-119 per bbl in CY12 & US$116132 per bbl in CY13 (Estimated) vs. US$111.26 per bbl in CY11:
We expect Brent crude oil prices to be in the range of US$112-119 per bbl in CY12 & US$116-132 per bbl in CY13 vs. US$111.26 per bbl in CY11. The severe cold weather in the US and Europe over the past couple of months has pushed up Brent crude oil prices. Also, a sharp spike has been seen in crude oil prices on the back of the rising political unrest in the Middle East and North Africa (MENA) region. The geo-political tensions in Libya have pushed Brent crude prices beyond the US$115 per barrel mark. While Saudi Arabias spare capacity is sufficient to offset any loss of production in countries like Libya and Egypt, Opec may find it difficult to compensate any probable disruption in production in a major oil producing country like Iran with its reserve capacity. However, we believe crude oil prices would settle at ~US$112-132 per barrel over the next two years as we are expecting there will be no unexpected change in demand-supply scenario and euro zone is another concern.

crude oil prices

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crude oil prices

Source: BP Statistical review 2012

NATURAL GAS FUTURE SCENARIO

Natural gas export also become competitive market as new suppliers came into market they are north America, western and eastern Europe, eastern mediterrian, Africa and noth asia. This reduces dependency on middle eastern and Russian reserve. The global development of shale gas assets (produce by hydrolic fracturing- the process used to extract the gas from the tight rock formations using a mixture of water, sand and chemical lubricants- has on ground water resources) change the scenario of natural gas. According to EIA estimates that global basins contain approx. 5760 trillion cubic feet (tcf) of shale gas reserves (not including the 862 tcf in the united state) which adds 40% to the worlds gas volume. But one the biggest hurdles is the potential environmental impact. Therefore, every country has approached shale gas production differently. The more emerging markets that find shale gas, the more it will have an effect on the global gas industry. Energy demand in emerging economies is on the rise making energy security a critical priority. Therefore, countries such as china, Poland, argentina are less likely to be concerned with the environmental consequences of hydraulic fracturing. This is especially true for countries in asia and Europe looking to decrease their reliance on Russian natural gas. But not much expecting any changes in gas prices in near future because the process takes time for an implementation.

World Natural Gas Consumption :

According to The International Energy Agency (IEA) the world natural gas consumption could grow 17% over the next five years as Chinese consumption is expected to double while Europes consumption is believed to remain below 2010s level. As demand surges in Asia and the U.S., natural gas consumption is seen rising by 17% by 2017, with the worldwide demand climbing to 576 billion cubic meters to 3.937 trillion, an average increase of 2.7% a year, while emerging nations will account for 69% of the gain.

China`s consumption will expand 13% to 273 billion cubic meters by 2017 from 130 billion in 2011; in the U.S. consumption will probably grow 13% to 779 billion cubic meters by 2017; and European demand may increase by 7.9% to 561 billion cubic meters. According to (IEA), Asia will be by far the fastest growing region, driven primarily by China, which will emerge as the third-largest gas user by 2013. South Korea and Taiwan have rebounded strongly from the recession, with a steady increase in LNG demand forecast. Although natural gas emits higher levels of greenhouse gases blamed for global warming, one of the reasons for this increased demand may be that more nations are turning away from nuclear power since last year`s Fukushima disaster in Japan. According to BP estimate consumption of natural gas will increase by 3.4844% y-o-y and estimated for CY12 & CY13 as 3004.3 Million tonnes oil equivalent (mtoe) and3108.0 Million tonnes oil equivalent (mtoe) respectively.
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Source: BP Statistical review 2012

World Natural Gas Production:

According to The International Energy Agency (IEA) Gas production in the U.S. might rise to 769 billion cubic meters (bcm) in 2017 from 653 bcm, while gas output in Russia is expected to rise from 659 bcm last year to 757 bcm over the next five years. Although the drop in gas prices slowed the pace of drilling, the new technologies and the extraction of oil trapped in difficult reservoirs is turning the U.S. from the biggest gas importer to a potential exporter, reducing its dependency on crude. Meanwhile, Asian LNG producers such as Malaysia and Indonesia are expected to become net importers as local demand rises and output falls; while the low prices for natural gas will lead to gas generating electricity to become equal with coal in the U.S. by 2017. The global trade balance is visibly shifting to Asia, which is now attracting increasing flows of LNG and pipeline gas. Australia is set to become the new Qatar (the world`s biggest exporter of LNG) with several plants currently under construction. However, the downside part of this is that natural-gas prices will inevitably climb; the surge in demand will drive prices up over the next few years. According to British Petroleum (BP) estimate production of natural gas will increase by 2.9988% y-o-y and estimated for CY12 & CY13 as 3041.6Million tonnes oil equivalent (mtoe) and 3132.1Million tonnes oil equivalent (mtoe) respectively.

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Asia Pacific Africa Middle East Europe & Eurasia S & C America North America

Source: BP Statistical review 2012

Estimated Prices of Natural Gas:

We are expecting natural gas prices will increase from 2011 level and trade at US$ 5.59 in CY12E and US$ 5.67 in CY13E as according to IEA the consumption of natural gas remain high than the production of natural gas in near future.

crude oil prices

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crude oil prices