Driven by global economic recovery, world oil demand is projected to grow 1.0 mb/d to 86.4 mb/d in 2011, according to OPEC Monthly Oil Market Report July 2010.
”Demand growth will come primarily from non-OECD, mainly China, India, the Middle East and Latin America. On the product side, demand for industrial fuels will be strong as a result of the ongoing economic recovery. Demand for transportation fuels is also forecast to increase. In the US, gasoline demand is assumed to return to its normal growth trend, although dependent on the pace of the recovery, as well as government policies, ”the report said.
”One factor expected to play an important role in next year’s oil demand is retail oil product price developments which will be impacted by tax policies and subsidies, potentially leading to a moderation in the recovery in oil demand, it added.
”Non-OPEC supply is forecast to grow 0.3 mb/d in 2011 to 52.2 mb/d, supported by Brazil, Canada, Azerbaijan, Colombia, and Kazakhstan, while the UK, Norway, and Mexico are expected to experience declines. The outlook for non-OPEC supply shows considerable risks and uncertainties. Major uncertainties include developments in the Gulf of Mexico related to the deepwater moratorium, decline rates across various regions and progress in the new subsalt frontier in Brazil, the monthly energy report indicated.
Moreover, the analystical report nored that economic and financial uncertainties as well as new challenges to global deepwater production have added to the general uncertainties on the supply side. Separately, OPEC NGLs and nonconventional oils are seen rising a further 0.5 mb/d in 2011, representing a similar increase to last year.
Taken together, it observed, the above forecasts for global demand and non-OPEC supply, including OPEC NGLs and nonconventional oil, result in demand for OPEC crude of 28.8 mb/d in 2011. This represents growth of 0.2 mb/d above the current year, the first increase in three years. However, the wide range of forecasts for oil demand and non-OPEC supply across the industry reflects the high level of uncertainty regarding the needs of the market in the coming year.
”If the past is a good guide, our initial projections are likely to be revised over the coming months, but by less than other institutions. The overall outlook indicates that the current stock overhang would be more than sufficient to supply the additional volumes needed in 2011. As a result, the oil market is set to remain well-supplied, especially in light of the ongoing increase in crude oil production capacity. In this environment, non-fundamental factors, mainly the behaviour of financial markets, will continue to be the key drivers of oil price volatility, the report remarked.
Total OECD is projected to increase 0.1 mb/d with Europe and the Pacific showing essentially no changes from 2010 volumes. North America’s oil usage is expected to increase by 0.2 mb/d. Oil demand in OECD Europe is expected to remain at 2010 levels, showing a minor decrease, mainly due to the very low base in 2009 and 2010. There will be a stagnant transportation sector and hence slightly decreased demand for motor gasoline and diesel. Winter product growth will partly offset declining gasoline, diesel and other industrial products along the year.
Furthermore, the OECD Pacific will continue to show further decline, as seen in 2010, due to less oil demand in Japan. Higher energy taxes, energy conservation, efficiency, alternative fuels and other factors are the main reasons for the decline in OECD demand. As a result of the continuing crisis in the US economy, North America’s oil demand is forecast to increase by only 0.2 mb/d in 2011 to average 23.8 mb/d.
India and the Middle East are estimated to show y-o-y oil demand growth of 0.1 mb/d and 0.2 mb/d respectively for 2011. Although agriculture, industrial and transport sectors are expected to be strong in India next year, the partial removal of price subsidies and other government policies are downside risks for oil demand growth in 2011. Transport, construction and petrochemical sectors will be the main drivers behind the strong Middle East oil demand next year as has been the case in 2010.
China is expected to contribute the most to world oil demand growth in 2011. China’s successful measures to minimize the negative effects of the world economic crisis will also continue in 2011. China’s apparent oil demand is forecast to grow by 0.4 mb/d in 2011, 20 tb/d lower than the growth estimate for the current year.
