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Friday, December 15, 2017

Accelerating growth in oil demand

In the latest medium term oil market report of the Paris-based International Energy Agency (IEA), oil demand in the OECD (Organisation for Economic Co-operation and Development) area is assumed to be weaker than previously forecast, but is stronger in non-OECD countries. Oil demand accelerates compared to previous periods as downward revisions to the U.S. outlook leave non-OECD consumption growing three times faster than in OECD countries, but with growth in both areas still being driven by transportation fuels.

 

Projected oil demand growth:

 

Period

Increase ‘000 barrels per day

Period

World

Latin America

North America

Europe

FSU

Asia

Africa

Mdle. East

1996-2001

1,040

73

363

71

-58

400

63

129

2001-2006

1,480

71

263

43

50

710

79

261

2006-2011

1,760

114

357

52

43

765

84

349

 

World oil supplies will, on average, marginally outpace demand growth between 2006 and 2011. Non-OPEC annual supply growth is expected to average a healthy 1.3 mbd over the five-year period, which, together with OPEC expansions and sharply rising biofuel output, should lead to a modest increase in OPEC spare capacity by 2009. Increased biofuel production and refinery upgrading capacity, together with a relatively unchanged crude quality base, should help to remove the recent tightness in gasoline supply and reduce some of the fuel oil surplus.

 

The average non-OPEC supply growth of 1.3 mbd over the next five years masks a bulge in growth of 3% per year for 2007- 2009. NGLs from Brazil, Russia, the Caspian Republics, Angola, North America and OPEC account for all of the expected growth. However, in the last two years of the forecast, non-OPEC supply growth slips to 1.25% per year. Over the whole period, high prices, substitution and changes to U.S. economic forecasts lead to an average 0.385 mbd downward revision of global oil product demand growth between 2006 and 2011.

 

The demand forecast does not include any adjustments to vehicle efficiency - as flagged in U.S. President Bush’s State of the Union address.

 

Ethanol production continues to expand and the IEA have identified more than 0.4 mbd of ethanol capacity under construction in the U.S. – bringing total U.S. capacity to at least 0.760 mbd by 2009. The IEA has therefore lifted the 2009 U.S. ethanol forecast from 0.360 mbd to 0.480 mbd – essentially meeting the current 2012 U.S. biofuel directive three years early. World biofuel supply is seen to grow to 1.0 mbd in 2007 and to 1.5 mbd by 2011, thus nearly doubling current production.

 

Word refinery capacity is expected to increase by 11.6 mbd over the period 2006-2011. New refinery crude distillation capacity is forecast to increase by 10.2 mbd, with an additional 1.4 mbd of capacity creep.

 

Copies of the IEA report are available on request from:

Contact: Erik Ranheim