IEA says call on OPEC oil to rise slowly over next five years
By Margaret McQuaile in London
October 12, 2012 - Rising production from independent producers will
account for the bulk of the 6 million b/d growth in world oil demand
over the next five years, leaving the call on the OPEC oil cartel to
grow by just 860,000 b/d over the forecast period, the International
Energy Agency said October 12 in its latest medium-term oil market
outlook.
World oil demand is set to grow steadily from 89.79 million b/d in 2012
to 95.68 million b/d in 2017, an increase of 5.99 million b/d over the
five years. But non-OPEC oil production is also expected to increase
steadily over the forecast period, from 53.22 million b/d this year to
57.53 million b/d in 2017, an increment of 4.31 million b/d.
This will leave demand for OPEC crude, plus movements in and out of
stocks, rising from 30.35 million b/d in 2012 to 31.21 million b/d in
2017.
The call climbs above 31 million b/d only in 2017.
"In contrast, last year's [medium-term report] foresaw a call of 32.5
million b/d by 2016," the IEA said.
OPEC production capacity, however, is expected to rise from 35 million
b/d in 2012 to 37.54 million b/d in 2017, the capacity growth of 2.54
vastly outstripping the 860,000 b/d growth in demand for OPEC crude over
the five years.
The IEA expects OPEC's surplus capacity to rise from 4.65 million b/d in
2012 to 6.34 million b/d in five years' time. But it says that notional
spare capacity historically has tended to average around 1 million b/d
above the effective level of spare capacity, which it puts at 5.34
million b/d in 2017.
OPEC will see some growth in production of natural gas liquids and
unconventional oil over the period, from 5.78 million b/d this year to
6.22 million b/d in 2017.
The IEA has shaved its world oil demand estimates compared with its
previous medium-term report of June 2011 and an update in December,
citing sluggish economic growth and increasing energy efficiency, and
the "transformative power" of non-conventional oil production
technologies which have exceeded earlier expectations when applied in
shale and tight formations in North America.
OPEC spare capacity
"With downwardly revised demand projections and the promise of new
supplies, the 'call on OPEC' has been trimmed and OPEC spare capacity
looks set to return to more comfortable levels than recent years," the
agency said.
"But this mild outlook is partly deceptive, given exceptional
uncertainty about the global economy and heightened regional
geopolitical risks," it added.
The IEA noted that within OPEC, the recovery in Libyan crude production
this year had defied expectations, Iraqi output had scaled new heights
and OPEC kingpin Saudi Arabia had been producing at 30-year highs for
most of this year.
Nevertheless, "an important takeaway from recent experience is that
after a decade dominated by concerns about runaway demand growth,
elevated supply-side risks have become a fact of life in the oil
market," the agency said.
"Last year's string of supply disruptions, in Syria, Yemen, Sudan, the
North Sea, Brazil and the Gulf of Mexico, illustrated the possibility of
a 'perfect storm' of coincidental disruptions in many oil provinces.
Even those realized disruptions, however, pale in comparison with the
new threat of unrest and political turmoil spreading further at the
heart of the Middle East producing region," it said.
"Effective levels of spare capacity, or the market's ability to mobilize
and deploy the full extent of nominal OPEC capacity, also becomes
somewhat more problematic in the context of the Iranian nuclear
dispute," it said, though it added that a return to more comfortable
levels of OPEC spare capacity suggested some insurance against elevated
disruption risks.
The IEA sees Iran's production capacity declining by more than 30% by
2011 compared with 2011 levels as a result of expanded international
sanctions that, it said, have withheld around 1 million b/d of
third-quarter supply from international markets.
"With no end in sight to the Iranian dispute, this report assumes that
current sanctions will remain in place for the duration of the forecast
period, progressively eroding Iran's long-term production capacity," the
IEA said.
"Yet the situation remains highly unpredictable and the sustainability
of the sanctions over the longer term is evidently untested. Therefore,
this should be understood as no more than a working assumption," it
added.
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