BP 2014 Annual Report Download - page 24

Our markets in 2014
A snapshot of the global energy market in 2014, as oil prices
return to a pattern of volatility.
Economic growth has remained relatively weak
globally, and was weaker in the emerging
non-OECD economies than recent years. Within
the OECD, the US and UK performed best –
growing at around their medium-term potential
– while Japan and the Eurozone have
underperformed against their potential.
Oil
Crude oil prices, as demonstrated by the
industry benchmark of dated Brent, averaged
$98.95 per barrel in 2014. For the period from
2010 to mid-2014, oil prices followed a pattern of
relative stability at around $110 a barrel. Prices
averaged $109 during the first half of 2014, but
fell sharply by more than 50% since June in the
face of continued strong growth of light, sweet
oil production in the US, and weak global
consumption growth. Brent prices ended the
year near $55.
Amid continued high oil prices for much of the
year and weak economic growth in emerging
economies, global oil consumption increased by
a below-average 0.6 million barrels per day
(mmb/d) for the year (0.7%).a The growth in
consumption was greatly exceeded by record
growth in non-OPEC production (2.0 mmb/d),
mainly by continued strong growth in US output.
OPEC crude oil production fell slightly due to
renewed outages in Libya. On balance,
production significantly exceeded consumption,
resulting in a large increase in OECD commercial
oil inventories.
In 2013 global oil consumption grew by roughly
1.4 million barrels per day (1.4%), significantly
more than the increase in global production
(0.6%).b Non-OPEC production accounted for all
of the net global increase, driven by robust US
growth.
Natural gas
Global price differentials in 2014 continued to
narrow. US gas prices moved up, while
European and Asian spot LNG prices weakened.
The Henry Hub index increased from $3.7 per
million British thermal units (mmBtu) in 2013 to
$4.4 in 2014.
Spot LNG prices in Europe and Asia fell with
rising global LNG supplies and weak demand
growth. New LNG projects in Papua New
Guinea and Australia, and recovering supplies in
Africa have added to the market in 2014.
Moderating demand and milder weather
reduced the UK National Balancing Point hub
price to an average of 50 pence per therm in
2014 (2013 68). The Japanese spot price fell to
an average of $13.9/mmBtu in 2014 (2013 $16.6).
In 2013 growth in natural gas consumption
slowed to a below-average rate and broad
differentials between regional gas prices
continued, although they did not widen further
as US gas prices recovered from their 2012
lows. Global LNG supply expanded in 2013,
following a contraction in supply in 2012. But the
LNG market remained tight, as strong demand
continued in Asia from economic growth and
nuclear power outages, and in Latin America
due to the effect of a drought on hydroelectric
production.
Oil and gas pricing
For more on upstream markets in 2014
see page 25.
Refining margins
For more on downstream markets in 2014
see page 30.
A mechanical technician works on the floating,
production, storage and offloading vessel in
Angola’s ultra-deep water.
‘Pipe alley’ at Cooper River petrochemicals plant.
The site is one of the world’s largest producers of
PTA, a raw material primarily used to manufacture
polyester and plastic bottles.
a From Oil Market Report 10 February 2015©,
OECD/IEA 2015, page 4.
b BP Statistical Review of World Energy June 2014.
05 06 07 0908 10 11 1312 14
Brent dated
$80
$100
$120
US dollars per barrel
Crude oil prices (quarterly average)
$60
BP Annual Report and Form 20-F 201420