(EnergyAsia, August 28 2013, Tuesday) — Citing demand contraction in Japan and Europe, and weaker growth outlook in China and India, the US Energy Information Administration (EIA) has reduced its global oil demand forecasts for the next two years.

In its latest August energy outlook, the EIA said world oil consumption will grow by 1.23% or 1.09 million b/d to 89.99 million b/d this year and by 1.36% to 91.29 million b/d in 2014. In June, the agency had expected global demand to reach 90.03 million b/d in 2013 and 91.22 million in 2014, while its May report called for consumption levels of 89.93 million b/d and 91.14 million b/d for the two respective years.

“Non-OECD Asia, particularly China, is the leading contributor to projected global consumption growth,” said the EIA, citing higher refinery throughput in China to boost crude imports. China’s liquid fuels consumption is seen rising by 420,000 b/d to 10.7 million b/d in 2013 and by a further 440,000 b/d to 11.14 million b/d in 2014.

“Recent data indicating a weaker industrial sector and a tightening money supply in the first half of 2013 signaled slower economic growth than in prior years and, if it continues, China’s oil demand growth could be lower than projected in the current outlook,” said the EIA. Between 2004 and 2012, Chinese liquid fuels demand grew by an average annual rate of 510,000 b/d.

Offsetting near-term Chinese demand growth, fuel consumption in the developed economies of the OECD is expected to fall by 320,000 b/d to 45.61 million b/d in 2013, and by another 180,000 b/d in 2014. The bulk of the decline will occur in Europe and Japan.

On the supply side, EIA expects total OPEC crude oil and liquids production to decline by 620,000 b/d in 2013, with most of it accounted for by Saudi Arabia in response to non-OPEC supply growth.

Iraq, Libya, Iran and Nigeria are also experiencing production cut-backs from political and military events.

EIA estimates that OPEC’s surplus capacity, mainly held in Saudi Arabia, averaged 2.3 million b/d in the second quarter of 2013. While higher than the 2.1 million b/d average during the same period last year, it was lower than the average 3.6 million b/d from 2009 through 2011.

EIA expects OPEC to boost its surplus capacity to an average of 3.6 million b/d in the fourth quarter of 2013 and to 4.6 million b/d in the fourth quarter of 2014. These estimates do not include additional capacity that may be available in Iran but is currently off line because of the effects of US and EU trade sanctions on the Islamic regime.

Meanwhile, US crude oil production will continue to rise as a result of new flows from unconventional reserves in the onshore Williston, Western Gulf, and Permian Basins, and offshore Gulf of Mexico.

Combined, these new fields will boost US oil production from 6.5 million b/d in 2012 to 7.4 million b/d in 2013 and 8.2 million b/d in 2014, said the EIA. Production from the Gulf of Mexico is forecast to average 1.3 million b/d in 2013 and 1.4 million b/d in 2014.

The US will become less dependent on oil imports. Since reaching 12.5 million b/d in 2005, its liquid fuel net imports have fallen to 7.4 million b/d in 2012, and could reach a new low of 5.6 million b/d by 2014.