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Monday, December 11, 2017

New oil price structure and slower growing world economy have helped dampen oil demand growth in many regions

OPEC's projections for next year do not bode well for the tanker market. OPEC says that although world oil demand growth has seen strong growth over the past 20 years (averaging 1.2 mbd), the new price structure and slower-growing world economy have helped dampen oil demand growth in many regions.

 

In 2009, world oil demand growth is forecast at 0.9 mbd, which is 0.1 mbd lower than in the current year. The slower world economy, along with high retail prices in the OECD, have affected oil demand and are expected to continue to have a negative effect in the coming year. Non-OECD countries' forecast oil demand growth of 1.2 mbd will therefore account for all of world oil demand growth next year.

 

In sectoral terms, transport fuel is expected to see the strongest growth. The forecast, however, is subject to uncertainties. Demand growth could be lower if transport fuel prices stay strong in 2009, although this could be offset by a relatively quick recovery in the U.S. economy or by colder winter weather.

 

Non-OPEC supply is expected to grow by 0.9 mbd in 2009, a much higher rate than in recent years. Russia, Kazakhstan and Azerbaijan are expected to continue to count as major sources of non-OPEC growth. Total production is expected to increase by 0.43 mbd over 2008. Brazil is estimated to contribute 0.3 mbd to the growth in 2009, while the U.S. is expected to increase 0.2 mbd.

 

The declining trend is expected to continue in the North Sea and Mexico, falling by 0.16 mbd and 0.27 mbd respectively. Biofuels are forecast to gain 0.17 mbd and OPEC NGLs plus non-conventional oils are expected to rise by 0.66mbd in 2009.

 

 

 Taken together, the above forecasts for global demand and non-OPEC supply (including OPEC NGL and non-conventional oils) would result in a demand for OPEC crude at 31.2 mbd. This represents a demand decline of around 0.7 mbd from the current year and the first significant decline in the demand for OPEC crude since 2002.

 

With OPEC production currently at more than 32.3 mbd, the year 2009 could see a significant build in inventories, more than enough to offset any downward revisions to non-OPEC supply.

 

Moreover, by the end of 2009, OPEC production capacity is expected to increase by more than 1 mbd over 2008, resulting in OPEC spare capacity of close to 15%, well above the 2008 estimate and the actual figure for 2007.

 

Contact: Erik Ranheim