IEA: Oil market to stay tight through 2012
The oil market, despite 4 years of elevated prices, will tighten further by 2012, predicts the International Energy Agency, Paris.
By OGJ editors
HOUSTON, July 11 -- The oil market, despite 4 years of elevated prices, will tighten further by 2012, predicts the International Energy Agency, Paris.
Spare production capacity among members of the Organization of Petroleum Exporting Countries will rise but remain "relatively constrained" until 2009 then fall to "minimal levels" by 2012 as demand growth remains strong, IEA says in its Medium-Term Oil Market Report published this month.
Although low spare capacity in OPEC implies high crude prices, and despite growing distillation capacity and biofuels supply, IEA expects refining margins to remain strong through 2012.
Using economic forecasts from the Organization for Economic Cooperation and Development (OECD) and International Monetary Fund, the agency assumes growth in global average gross domestic product of about 4.5%/year. That assumption yields oil demand growth of 2.2%/year.
If GDP grows only by 3.2%/year, oil demand growth slows to 1.7%/year, and the need for OPEC crude falls by about 2 million b/d in 2012, IEA says. "But this merely postpones by a year the point at which oil demand growth surpasses the growth in global oil capacity, in effect delaying the return of minimal spare capacity by only a few years unless the trend in upstream capacity growth changes."
Here are highlights of IEA's forecast for 2007-12:
-- Oil demand will increase to 95.82 million b/d in 2012 from an estimated 86.13 million b/d in 2007. Most of the growth will in Asia and the Middle East, where demand will increase at nearly three times its rate of the industrialized countries of the OECD. The rapid-growth countries are approaching the income threshold of about $3,000/person at which consumers buy cars and energy-consuming goods, IEA notes.
-- Non-OPEC liquids supply will increase during the forecast period to 52.56 million b/d from 49.98 million b/d, with the growth rate diminishing after 2009. Non-OPEC liquids supply includes crude, condensate, NGL, and biofuels.
-- OPEC's production of NGL, which isn't subject to the group's production quotas, grows in the forecast period to 7.08 million b/d from 4.86 million b/d.
-- The need for OPEC crude, which is subject to quotas, net of anticipated stock changes and balancing items, rises to 36.81 million b/d in 2012 from 34.4 million b/d in 2007.
-- The calculated need for OPEC crude implies OPEC spare production capacity of 2.5 million b/d in 2007 (2.9% of global demand), 3.07 million b/d in 2008 (3.5%), 3.37 million b/d in 2009 (3.7%), 3.24 million b/d in 2010 (3.5%), 2.55 million b/d in 2011 (2.7%), and 1.55 million b/d in 2012 (1.6%).
-- For OPEC production capacity, IEA assumes no net expansions in Iran, Iraq, and Venezuela and a negligible increase for Indonesia. It also assumes that 500,000 b/d of Nigerian capacity offline for the past year remains idle through the forecast period. IEA forecasts these increases: Saudi Arabia, 1.77 million b/d to 12.57 million b/d in 2012; the United Arab Emirates, 500,000 b/d to 3.38 million b/d; Angola, 500,000 b/d to 2.17 million b/d; Kuwait, 420,000 b/d to 3.06 million b/d; Nigeria, 370,000 b/d to 2.84 million b/d; Qatar, 210,000 b/d to 1.16 million b/d, Algeria, 190,000 b/d to 1.56 million b/d; and Libya, 170,000 b/d to 1.92 million b/d.
-- Supply of automotive biofuels will reach 1.8 million b/d by 2012, compared with 900,000 b/d in 2006. The 2012 projection is 1.2 million b/d below the potential level of capacity additions. IEA cites rising prices of feedstocks, the lack of clear long-term mandates and subsidies in many countries, and food-fuel competition as reasons for the conservatism of its outlook.
-- Crude distillation capacity will increase by 10.6 million b/d during the forecast period, of which 9.1 million b/d will be new capacity and 1.5 million b/d will be capacity creep resulting from upgrades of existing units. Expansion of existing refineries, mainly in Asia-Pacific and the US, will raise global capacity by 4 million b/d. New-build refineries will add 5.1 million b/d of capacity, mainly in the Middle East, China, and elsewhere in Asia, especially India.