WASHINGTON - The U.S. government's energy agency may be the first to revise up its oil demand growth forecast for 2010 this week, but it is the group's first view of 2011 fundamentals that could garner the most attention.
With the global economy showing signs of recovery, oil markets have priced in a bounce in demand after two years of decline, and an upgrade to the U.S. Energy Information Administration's last forecast for a 1.26 million barrels per day rise in 2010 may do little to change sentiment.
The greater focus will be on the group's first view of 2011, which analysts say could be the first year in which demand begins to once again test global supply.
"There's been this conventional wisdom out there that the market is going to turn around and we're going to be back at a tight supply-demand situation, perhaps as early as 2011," said Guy Caruso, former head of the EIA and now a senior adviser at the Center for Strategic and International Studies think tank.
Caruso said "2011 could be an important year, it depends very much on how quickly demand recovers in line with economic growth."
The EIA's monthly short term energy outlook will be published on Tuesday at noon EST. The Paris-based Energy Information Administration will update its own forecasts on Friday, and OPEC will follow wit its own report on December 15, but neither will include a view of 2011.
In the near-term, none of those publications may shift the course of an oil market that has stalled at around $75 a barrel, with a significant supply overhang in global oil stockpiles and an as-yet still limited demand recovery.
"Petroleum demand needs to walk before it runs," said Tim Evans, energy analyst for Citi Futures Perspective. Evans said oil traders may be too closely following the stock market, instead of the actual fundamentals of the oil market.
A combination of factors including the glut of natural gas, the financial crisis, and the oil spike and subsequent crash of 2008 may keep demand in check for a while, said Phil Flynn, an energy analyst with PFGBest Research.
"Even if the economy gets stronger out three years, we're not going to see demand bounce back as fast as we would have seen a few years ago," Flynn said. "It may take many years for demand growth to get back to what it was," he added.
A key issue will be energy consumption in developing nations such as China. Last month, EIA raised its petroleum demand forecast for China in 2010 to 8.66 million bpd from a previous forecast of 8.54 million bpd.
Chinese oil demand was one of the key drivers of oil's six-year rally that sent prices up near $150 a barrel in 2008.
On the supply side, EIA raised its projection for oil output from non-OPEC countries in 2010 to 50.43 million bpd from its previous forecast of 50.26 million bpd.
Evans said he expects moderate gains in non-OPEC oil production in 2010 along the lines of the EIA's estimates.
Evans cautioned against reading too much into the 2011 estimates the government will release, however.
"Anything they come out with for 2011, I would treat as one scenario, not anything that I can take to the bank," Evans said.
With the global economy showing signs of recovery, oil markets have priced in a bounce in demand after two years of decline, and an upgrade to the U.S. Energy Information Administration's last forecast for a 1.26 million barrels per day rise in 2010 may do little to change sentiment.
The greater focus will be on the group's first view of 2011, which analysts say could be the first year in which demand begins to once again test global supply.
"There's been this conventional wisdom out there that the market is going to turn around and we're going to be back at a tight supply-demand situation, perhaps as early as 2011," said Guy Caruso, former head of the EIA and now a senior adviser at the Center for Strategic and International Studies think tank.
Caruso said "2011 could be an important year, it depends very much on how quickly demand recovers in line with economic growth."
The EIA's monthly short term energy outlook will be published on Tuesday at noon EST. The Paris-based Energy Information Administration will update its own forecasts on Friday, and OPEC will follow wit its own report on December 15, but neither will include a view of 2011.
In the near-term, none of those publications may shift the course of an oil market that has stalled at around $75 a barrel, with a significant supply overhang in global oil stockpiles and an as-yet still limited demand recovery.
"Petroleum demand needs to walk before it runs," said Tim Evans, energy analyst for Citi Futures Perspective. Evans said oil traders may be too closely following the stock market, instead of the actual fundamentals of the oil market.
A combination of factors including the glut of natural gas, the financial crisis, and the oil spike and subsequent crash of 2008 may keep demand in check for a while, said Phil Flynn, an energy analyst with PFGBest Research.
"Even if the economy gets stronger out three years, we're not going to see demand bounce back as fast as we would have seen a few years ago," Flynn said. "It may take many years for demand growth to get back to what it was," he added.
A key issue will be energy consumption in developing nations such as China. Last month, EIA raised its petroleum demand forecast for China in 2010 to 8.66 million bpd from a previous forecast of 8.54 million bpd.
Chinese oil demand was one of the key drivers of oil's six-year rally that sent prices up near $150 a barrel in 2008.
On the supply side, EIA raised its projection for oil output from non-OPEC countries in 2010 to 50.43 million bpd from its previous forecast of 50.26 million bpd.
Evans said he expects moderate gains in non-OPEC oil production in 2010 along the lines of the EIA's estimates.
Evans cautioned against reading too much into the 2011 estimates the government will release, however.
"Anything they come out with for 2011, I would treat as one scenario, not anything that I can take to the bank," Evans said.
