WASHINGTON (MNI) – The following is the first part of excerpts from
the Energy Information Administration’s June Short-Term Energy Outlook
published Tuesday:

Crude Oil and Liquid Fuels Overview.

EIA projects that total world oil consumption will grow by 1.7
million barrels per day (bbl/d) in 2011, which is about 0.3 million
bbl/d higher than last month’s Outlook, primarily because of higher
forecasts of consumption for electricity generation in China, Japan, and
the Middle East. Projected world consumption increases by 1.6 million
bbl/d in 2012, unchanged from last month’s Outlook. Projected supply
from non-OPEC countries increases by an average of about 0.6 million
bbl/d in 2011 and 0.5 million bbl/d in 2012.

EIA expects that the market will rely on both a drawdown of
inventories and increases in production from both OPEC and non-OPEC
countries to meet projected demand growth. While OPEC crude oil
production declines 0.4 million bbl/d in 2011 because of the disruption
forecast to Libyan production, OPEC non-crude liquids production grows
by 0.6 million bbl/d. EIA expects the world crude oil market will
continue to tighten in 2012, with forecast OPEC crude oil production
increasing by 0.7 million bbl/d and OPEC non-crude production growing by
0.4 million bbl/d.

Among the major uncertainties that could push crude oil prices
above or below our current forecast are: continued unrest in producing
countries and its potential impact on supply; decisions by key
OPEC-member countries regarding their production in response to the
global increase in oil demand; the rate of economic growth, both
domestically and globally; fiscal issues facing national and
sub-national governments; and China’s efforts to address concerns
regarding its growth and inflation rates.

Global Crude Oil and Liquid Fuels Consumption.

EIA expects that world liquid fuels consumption, which reached a
record level of 86.7 million barrels per day in 2010, will grow by 1.7
million bbl/d in 2011 and by an additional 1.6 million bbl/d in 2012,
resulting in total world consumption of 90.0 million bbl/d in 2012.
Countries outside the Organization for Economic Cooperation and
Development (OECD) will make up almost all of the growth in consumption
over the next two years, with the largest increases coming from China,
Brazil, and the Middle East. Forecasts of 2011 consumption in China,
Japan, and the Middle East were raised by 120 thousand bbl/d, 80
thousand bbl/d, and 110 thousand bbl/d, respectively,from last month’s
Outlook because of higher expected demand for petroleum-fueled electric
power generation. EIA now expects consumption in China to increase by
700 thousand bbl/d in 2011.

Non-OPEC Supply.

EIA projects that non-OPEC crude oil and liquid fuels production
will increase by 590 thousand bbl/d in 2011 and by 490 thousand bbl/d in
2012. The greatest increases in non-OPEC oil production during 2011
occur in Brazil (130 thousand bbl/d), Canada (170 thousand bbl/d), China
(140 thousand bbl/d), Colombia (110 thousand bbl/d) and countries that
were formerly part of the Soviet Union (210 thousand bbl/d). In 2012,
EIA expects production growth to remain strong in Canada, China, Brazil,
and Colombia, but forecast production growth in the former Soviet Union
countries slows to 80 thousand bbl/d. Other non-OPEC areas are expected
to decline, including a decrease in North Sea production of 110 thousand
bbl/d in 2011 and a further decrease of 200 thousand bbl/d in 2012.

OPEC Supply.

Forecast OPEC crude oil production declines by 370 thousand bbl/d
in 2011, followed by an increase of 660 thousand bbl/d in 2012. EIA
assumes that about one-half of Libya’s pre-disruption production will
resume by the end of 2012. Estimated OPEC crude oil production during
the first quarter of 2011 averaged almost 30 million bbl/d. EIA
projects that OPEC surplus capacity will fall from 4.0 million bbl/d at
the end of 2010 to 3.6 million bbl/d at the end of 2011, followed by a
further decline to 3.1 million bbl/d by the end of 2012. Estimated OPEC
production of non-crude liquids totals 6.0 and 6.4 million bbl/d in 2011
and 2012, respectively.

OECD Petroleum Inventories.

EIA expects that OECD inventories will decline in 2011 following
the steep drop in floating storage that has already occurred. Projected
onshore OECD stocks fall by about 120 million barrels in 2011, followed
by an additional 110 million-barrel decline in 2012. Days of supply
(total inventories divided by average daily consumption) drops from a
relatively high 57.9 days during the fourth quarter of 2010 to 54.6 days
in the fourth quarter of 2011, and 52.4 days of supply in the fourth
quarter of 2012.

Crude Oil Prices.

WTI crude oil spot prices averaged $103 per barrel inMarch, $110
per barrel in April, and $101 per barrel in May. The WTI crude oil
price was $113 per barrel at the beginning of May but fell to $97 per
barrel by the end of the first week of the month. For the remainder of
May, WTI prices fluctuated within a relatively narrow range of between
$96 and $103 per barrel. EIA still expects oil markets to tighten as
growing liquid fuels demand in the emerging economies and slowing growth
in non-OPEC supply maintain upward pressure on oil prices. EIA expects
that WTI spot prices, which averaged $79 per barrel in 2010, will
average $102 per barrel in 2011 and $107 per barrel in 2012, about the
same as expected in last month’s Outlook (West Texas Intermediate Crude
Oil Price Chart).

Growing volumes of Canadian crude oil imported into the United
States contributed to record-high storage levels at Cushing, Oklahoma of
over 41 million barrels at the end of March 2011 (86 percent of working
capacity at Cushing), and a price discount for WTI compared with
similar-quality world crudes such as Brent. A discount for WTI is
expected to persist until transportation bottlenecks impacting the
movement of mid-continent crude oil to the Gulf coast are relieved.
Consequently, the projected U.S. refiner average acquisition cost of
crude oil, which was about $2.70 per barrel below WTI in 2010, is $1.60
per barrel above WTI in 2011 and $1.10 per barrel above WTI in 2012.

Energy price forecasts are highly uncertain (Energy Price
Volatility and Forecast Uncertainty). WTI futures for August 2011
delivery over the 5-day period ending June 2 averaged $101.49 per barrel
and implied volatility averaged 29 percent, establishing the lower and
upper limits of a 95-percent confidence interval for the market’s
expectations of monthly average WTI prices in July of $83 per barrel and
$124 per barrel, respectively. Last year at this time, WTI for August
2010 delivery averaged $75 per barrel and implied volatility averaged 39
percent. The corresponding lower and upper limits of the 95-percent
confidence interval were $58 per barrel and $97 per barrel.

U.S. Crude Oil and Liquid Fuels

U.S. Liquid Fuels Consumption.

Total consumption of liquid fuels increased by 270 thousand bbl/d
(1.4 percent) during the first quarter 2011 over the same period the
year before (U.S. Liquid Fuels Consumption Growth Chart). Consumption
growth during the first quarter was led by distillate fuel oil (160
thousand bbl/d) and liquefied petroleum gas (70 thousand bbl/d). Motor
gasoline consumption fell by 50 thousand bbl/d. Consumption growth is
expected to slow over the forecast. Projected total U.S. liquid fuels
consumption increases by an average 150 thousand bbl/d (0.8 percent) in
2011, and by a further 130 thousand bbl/d (0.7 percent), to 19.4 million
bbl/d in 2012, which is still well below the record-high 20.8 million
bbl/d in 2005. Distillate fuel, buoyed by continued increases in
industrial production, accounts for two thirds of the projected increase
in liquid fuels consumption in 2011. Motor gasoline is the fastest
growing consumption category in 2012, reflecting growing population,
rising employment and income, and a predicted end to the recent steep
run-up in retail gasoline prices.

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** Market News International Washington Bureau: 202-371-2121 **

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