WASHINGTON Saudi Arabia has been pumping 9 million barrels per day of crude since January, far more than earlier estimated but not enough to keep oil prices below $100 for the rest of this year, the U.S. government's energy forecasting agency said on Tuesday.
The Energy Information Administration (EIA) revised its previous estimates to peg Saudi output at 8.9 million bpd in December, 300,000 bpd more than earlier forecast, and at an even 9 million bpd during January and February.
That is much higher than other independent estimates, and raises more questions about the extent to which the kingdom has increased output since the Libyan crisis.
As global oil markets grapple with the loss of nearly all Libyan exports, estimates of OPEC member production are more critical than ever.
In its new monthly forecast, the EIA said it expected total OPEC crude oil production to fall from 29.79 million bpd in February to 28.95 million bpd in March, mainly reflecting a a loss of Libyan oil.
The agency also increased its 2011 forecast for U.S. oil by $9 to a record yearly average of $102 a barrel, near the very top end of analysts forecasts.
"Continuing unrest in Libya as well as other North African and Middle Eastern countries has led to the highest crude oil prices since 2008," the EIA said. "The market remains concerned that the unrest in the region could continue to spread."
Because foreign oil prices are much higher, U.S. refiners will pay several dollars more for each of the millions of barrels of crude they will import this year, peaking at an monthly average price of $109 a barrel in May and June, EIA said.
Saudi Arabia has said it is stepping up production to cover the loss of over 1 million barrels per day (bpd) of supply, but more evidence is emerging that it had opened the taps prior to the mid-February unrest. The most recent estimate by Petroleum Intelligence Weekly put the kingdom at 9.4 million bpd in February, the top end of most estimates.
Although higher production has helped stabilize oil prices, it also reduces the amount of idle output capacity available to meet any further supply shortages or demand increases, something analysts warn could ultimately fuel more buying.
"We believe that Saudi production could be 0.5-1 million bpd higher than the official numbers suggest, which would imply that OPEC spare capacity has already dropped below 2 million bpd," Goldman Sachs said in a note on Tuesday.
The higher oil prices will raise the cost for gasoline, heating oil, diesel fuel and jet fuel that are processed from crude, which will reduce the money consumers and businesses have to spend on other goods and services.
The agency said prices for gasoline in the United States, the world's biggest motor fuel consumer, should average $3.70 a gallon during the upcoming summer driving season. There is a 25 percent chance the pump price will exceed a monthly average of $4 a gallon, the EIA warned.
"Rising crude oil prices are the primary reason for higher retail prices, but higher refining margins are also expected to be a contributing factor," the agency said.