The U.S. Energy Department, in its short-term energy outlook for the month, predicts some economic recovery in store given optimism surrounding international stimulus efforts. Overseas, however, geopolitical uncertainty could depress some markets, leading to lingering volatility in the energy sector. More drilling in the United States, meanwhile, is expected to contribute to overall growth there. On the consumption side, countries outside the OECD are expected to account for "essentially all" of the growth.
The Energy Department's Energy Information Administration notes, in its monthly report, that Brent crude oil prices rallied to more than $100 per barrel in recent trading, after slumping to the $90 mark early this summer. The EIA said it attributed the increase in crude oil prices to expectations that authorities in Beijing, Brussels and Washington would throw their support behind economic stimulus in order to encourage more growth. This, in turn, would encourage consumption and subsequent investments on the back of petrodollars.
In terms of U.S. consumption, for both crude oil and petroleum products, the EIA expects more domestic focus in the energy sector. Lower domestic consumption, coupled with higher domestic crude oil production, means the United States will rely on foreign suppliers to meet 39 percent of its energy needs in 2013.
"If the 2013 estimate holds true, it would be the first time the share of total U.S. consumption met by total liquid fuel imports is less than 40 percent since 1991," the agency said.
Nevertheless, China and other countries outside the Organization for Economic Cooperation and Development are expected to account for "essentially all consumption growth" in terms of global oil consumption. The EIA said it forecast a consumption growth of 800,000 barrels of oil per day in 2012. Consumption should reach its peak for the year during the third quarter and then pick up steam again next year when global consumption grows by 900,000 bpd.
The EIA, however, said the situation in Europe was mixed. A deepening of the financial crisis could push crude oil prices lower if demand falters, though "oil prices will likely rise and fall as perceptions about the likelihood of a deeper crisis evolve." Oil consumption in Europe is expected to decline by 400,000 bpd for this year and another 200,000 bpd in 2013.
Concern over the potential for economy recovery in Europe remains a primary market concern. On Wednesday, Bank of England Gov. Mervyn King said output has been flat and there were few expectations of an economic recovery.
"We are navigating rough waters and storm clouds continue to roll in from the euro area," he said in a statement.
By. Daniel Graeber of Oilprice.com