US Becoming Self-Suffient in Energy Demand by 2035?

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November 13, 2012 11:24 PM EST

At the latest World Energy Outlook report, the IEA forecast that the US would become a net exporter of natural gas by 2020 and would be almost self-sufficient in energy by 2035. According to the agency’s estimates, the US will become the world’s largest producer in 2020 with output of 11.1M bpd before easing to 10.9M bpd in 2025. For Saudi Arabia, production will be 10.6M bpd and 10.8M bpd in 2020 and 2025 respectively. The Kingdom will, however, return to be the largest producer in 2030 with output of 11.4M bpd, compared with Us’ 10.2M bpd. On the demand side, global oil consumption is expected to increase to 99.7M bpd in 2035, up from 87.4M bpd in 2011. China, India and the Middle East is expected to account for 60% of the growth in total energy demand.The IEA stated that energy saving efforts implemented by various countries have helped reduce worldwide oil demand by almost 13M bpd by 2035. Yet, full implementation in accordance to the agency’s advice would lead to a reduction by half.

The IEA’s expectation that the US would become a net oil exporter has huge implication on the world oil market. According to the agency, this would “switch direction of international oil trade” as almost 90% of Middle Eastern oil exports will be shifted to Asia from the US by 2035. Yet, this estimate has triggered much doubt regarding its accuracy. According to the IEA’s Oil Market Report in October, US’ oil demand would be around 18.7M bpd in both 2012 and 2013. Even if we assume there’s no increase in consumption over the coming years, it would be hard for the country to become self-sufficient with around 10M bpd of oil production. A possibility is that the research includes other resources such as natural gas and the US would raise its imports from Canada so as to eliminate its reliance on the Middle East countries. However, the IEA’s presentation has not made these issues clear.

Gold prices slipped on Tuesday despite geopolitical tensions in Gaza Strip. Israel has started fighting against Syria for the first time in 40 years. Meanwhile, Israel returned fire after more than 65 rockets were fired from Gaza (probably by Palestinians) into Israel. Israeli President Netanyahu said that the government is “closely monitoring what is happening on our border with Syria and there we are also ready for any development…Israel will not sit idly by in the face of attempts to attack us. We are prepared to intensify the response”.

On the dataflow, economic confidence in the Eurozone deteriorated further. Economic sentiment surprisingly slipped to -2.6 in November from -1.4 a month ago. In Germany, the reading dropped to -15.7 from -11.5 in October. The market had anticipated an improvement to -9. The “current situation” index in Germany dipped -4.6 points to 5.4 during the month. UK’s headline inflation accelerated to +2.6% y/y in October from +2.2%, while core inflation grew by the same amount. Despite sharp jump in inflation, the BOE is expected to leave the Bank rate unchanged at 0.5% and expand asset purchases further next year so as to bolster the fragile economy.

Oil and Gold Reports contributed by Oil N' Gold

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Oil and Gold Reports contributed by Oil N' Gold

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