Opec said in its annual outlook that it expected lacklustre economic growth and other factors to keep a lid on demand growth for its members’ oil over the next five years.
In its outlook report, the producers group said it expected world oil demand to grow from 91.3 million barrels per day last year to 97.4 million bpd in 2020, which is 500,000 bpd higher than in its previous outlook.
But that rate of growth trails behind expected economic growth, which itself is expected to be “below potential” in the medium term, with the result that Opec foresees little actual growth in demand for its members’ crude through 2020.
“Economic growth … remains below its potential as the legacies of the financial crisis and new emerging issues negatively impact the global growth momentum,” Opec’s report said.
World economic growth is expected to rise from 3.2 per cent this year to 3.5 per cent next year, and then at a quickening pace so that overall economic growth is expected to average 3.6 per cent annually in the 2015 through 2020 period.
Output growth by non-Opec producers is expected to continue to slow because of the oil price crash in the past year, which it says has seen about US$200 billion of projects cancelled and 150,000 jobs cut.
Still, the increase in oil demand over the next five years is expected to be largely met by higher supply from non-Opec producers.
Opec said it expects non-Opec supply of liquids (crude plus natural gas liquids, biofuel and others) to grow from 56.5 million bpd last year to 60.2 million bpd in 2020, which is 1 million bpd lower than it forecast last year.
But that means demand for Opec oil over the period is actually expected to decrease slightly, from an estimated 31 million bpd to 30.7 million bpd in 2020.
The report covers the period out through 2040 and acknowledged the many uncertainties. It pointed out that about $10 trillion of investment would be needed over that period to meet forecast oil and gas demand, most of it ($7.2tn) in the upstream sector. The biggest investment – about $250bn a year – will be needed in non-Opec countries, while Opec itself will need $40bn a year through 2020.
Opec also expects a big shift in the world downstream playing field, with refineries shutting in advanced economies as developing countries grow at a faster pace to overtake developed countries and account for more than half the world’s oil demand by 2020.
Opec also warned about the effect that policies agreed in Paris this month to reduce carbon emissions could have on poor countries.
“We need to keep in mind that the three pillars of sustainable development – economic, environmental and social – mean different things to different people,” said Abdalla El Badri, Opec’s secretary general, in the report.
“We need to remember that billions of people still rely on biomass for their basic needs, and more than a billion have no access to electricity.
“These are people that need their voices heard.”
amcauley@thenational.ae
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