The U.S. Energy Information Administration predicts the Organization of Petroleum Exporting Countries is about to regain its dominance in world oil supply.
However, EIA says in its latest short term energy outlook, OPEC members may have to wait until the end of 1997 before signs of a seller's market begin to appear.
"As it has for the past several years, OPEC will capture about 40% of the world market during the forecast period (1996-97)," EIA said.
"Non-OPEC suppliers will capture 70% of 1996 growth, but the major increase in non-OPEC production is over for the near term."
Non-OPEC supply
EIA said production in the former Soviet Union has leveled off and potentially could increase to more than 7 million b/d by mid 1997, but it is unclear if all of the increase will be exported.
North Sea oil flow will rise by more than 400,000 b/d in 1995 and another 600,000 b/d in 1996 but level off in 1997. U.S. production will continue to decline by 150,000 b/d/year in 1996 and 1997.
With those developments, EIA said, non-OPEC supply will increase by 1.2 million b/d in 1996 and 700,000 b/d in 1997. As a result, OPEC's market share will continue to decline in 1996 but turn around in 1997.
EIA expects OPEC productive capacity additions to advance about in line with production increases during 1996-97, resulting in continued price weakness. Capacity additions of more than 500,000 b/d are expected in 1996 and again in 1997.
The report pegs OPEC's current surplus productive capacity, excluding Iraq, at 2.8 million b/d. That may rise to nearly 3.5 million b/d in 1997. Most of the surplus capacity is in Saudi Arabia with a 1.9 million b/d cushion, Kuwait 500,000 b/d, Iran 200,000 b/d, and the United Arab Emirates 200,000 b/d. Venezuela plans to tap its capacity as it develops, which could be about 3.1 million b/d in 1996.
EIA said exports from the Persian Gulf will increase slightly during the next year as regional consumption increases largely offset production gains.
"However, as North Sea production levels off next year, incremental supplies should reappear from the Persian Gulf area. In 1995, 18.4 million bbl were produced by the Persian Gulf countries, of which the U.S. imported 1.6 million b/d, Japan nearly 4 million b/d, and western Europe almost 3 million b/d."
Longer term
In its 1996 annual energy outlook, EIA observed, "A notable feature of the international oil market in recent years has been the ability of non-OPEC countries to maintain, and even to expand slightly, their levels of oil production.
"Many past forecasts by oil market analysts have assumed that non-OPEC production would soon peak and then decline. OPEC nations were expected to supply an increasing amount of oil to meet declining supply from other parts of the world and rising demand.
"Over the past few years, however, non-OPEC supply has slowly crept up rather than declining, which has been a major factor contributing to the relative stability of world oil prices. OPEC supply has continued to grow, but at a slower rate than many had expected."
Reflecting those market conditions, EIA lowered its world oil price forecast for 2010 to $23.70/bbl in 1994 dollars, compared with $24.63 in the 1995 forecast. The 1996 forecast for 2015 is $25.43/bbl.
EIA said, "OPEC, with its vast store of readily accessible oil reserves, is expected to be the source of marginal supply to meet future incremental demand. By 2000, OPEC could supply 35 million b/d and more than 52 million b/d by 2015, or about twice the level of production in 1990.
"Oil production in non-OPEC nations has received boosts from discoveries as well as technical innovations that have delayed production declines in mature fields.
"For example, advances in 3D seismology, innovations in horizontal drilling techniques, and improved underwater techniques have made it possible to tap much smaller pools than was feasible in the past.
"Assuming a continuation of this trend, production in non-OPEC na- tions is projected to continue creeping slowly upward, reaching just over 41 million b/d in 2010, then declining slightly to 40.3 million b/d-near the 1994 level-in 2015."
EIA predicted a substantial increase in world oil consumption during the next 20 years.
"With rapid gains in energy demand anticipated for the developing countries, world oil consumption will rise to more than 74 million b/d by the end of the decade and should reach 89-99 million b/d by 2015.
"Much of the growth in demand for oil is concentrated in the developing nations of Asia, where demand growth greater than 5%/year is expected. Annual growth in demand slightly in excess of 0.8% is anticipated for the countries in the Organisation for Economic Cooperation & Development."
The U.S. scene
EIA said OPEC members will account for more than half of all U.S. petroleum imports by 2000.
After then, the OPEC share will increase steadily to about 57% in 2015. The Persian Gulf share of U.S. imports from OPEC will increase from 41% in 1994 to more than 50% in 2015.
EIA also predicted U.S. crude oil imports from the North Sea will increase slightly through 2000, then decline as North Sea production ebbs.
The agency said, "Significant imports of petroleum will continue from Canada and Mexico, U.S. partners in the North American Free Trade Agreement. U.S. West Coast refiners are expected to import crude oil from the Far East to replace the modest volumes of Alaskan crude oil that can now be exported."
U.S. imports of light products will nearly double to almost 1.6 million b/d in 2015, with most of the increase coming from refiners in the Caribbean basin and Middle East, where refining capacity is expected to rise significantly.
EIA said, "Vigorous growth in demand for lighter petroleum products in developing countries has an impact on the quality of crude oils imported by the U.S. With extensive downstream processing capabilities, U.S. refiners are likely to import smaller volumes of light, low sulfur crude oils."
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