Bloomberg News

OPEC Sees Demand for Its Crude Falling to 2016 on Economy, Shale

November 08, 2012

Demand for OPEC’s crude will decline through to 2016 because of the weakening economic outlook and growing reliance on competing sources such as U.S. shale oil deposits and natural gas liquids.

Global need for fuel from the Organization of Petroleum Exporting Countries will shrink to 29.7 million barrels a day in 2016, 1.4 million less than this year, the group said today in its annual World Oil Outlook. The estimate for 2015 is 1.6 million barrels lower than that forecast in last year’s report. OPEC predicts it may have more than 5 million barrels of daily spare production capacity as early as next year.

“The economic recovery remains fragile, the risks stemming from the euro zone debt crisis appear to be heightening, economic growth in major developing countries is facing strong headwinds,” the group’s Vienna-based research department, led by Hasan Qabazard, said. “Shale oil represents a large change to the supply picture.”

Brent crude futures have tumbled 16 percent from this year’s peak, trading at about $107.50 a barrel today, amid concern that Europe’s failure to resolve its debt turmoil is hindering the world economy. The U.S. this year is set to achieve its highest level of energy independence in more than 20 years amid booming oil shale output in North Dakota and Texas, according to the Energy Department.

Global Demand

OPEC reduced estimates for global consumption in 2016 by 1 million barrels to 92.9 million a day, meaning demand will advance by 5.1 million, or 4.7 percent, from last year. Seventy percent of the increase will come from emerging nations in Asia, while fuel use in developed nations, which peaked in 2005, will decline by 0.9 percent to 45.7 million a day from this year to 2016, according to the report.

Supplies from outside OPEC will increase in excess of 4 million barrels a day from 2011 to 2016, reaching 56.6 million. The gain will be driven by output of U.S. shale oil, Canadian oil sands, and crude from the Caspian Sea and Brazil. The assessment for non-OPEC supply to 2015 is 2 million barrels a day more than in last year’s report.

OPEC’s 12 members will spend $270 billion on 116 projects to maintain and increase production, boosting total output, including natural gas liquids, by 5 million barrels a day by 2016. The amount of spare crude capacity may surpass 5 million daily barrels next year or in 2014.

Fuel Efficiency

The organization also cut its global demand forecast for 2035, the end of the period covered by the report, by 2 million barrels to 107.3 million a day, as higher prices curb consumption and cars and ships use fuel more efficiently. OPEC will need to bolster output by a “modest” 5 million barrels a day to meet world requirements by 2035, it said.

OPEC still expects its share of global oil will remain “approximately constant” at 32 percent through to 2035 as it boosts output of natural gas liquids, or NGLs, and supplies from gas-to-liquid projects.

The group raised its price assumptions, projecting that OPEC’s basket of crudes, a benchmark composed of blends from each member, will average $100 a barrel through to 2016 and then climb to $155 by 2035 because of higher costs to bolster production. The basket averaged $110 this year.

OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. They are next scheduled to meet on Dec. 12 in Vienna.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net


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