–US Shale Sector To Recover Quickly As Market Conditions Improve
–Sees Longer-Term Decline In OECD Oil Demand, Increased Consumption In Non-OECD Region
By Brai Odion-Esene, SW4 Insights for Mace News
WASHINGTON (MaceNews) – Influential oil group OPEC Thursday predicted a partial rebound in oil demand next year, although the coronavirus outbreak remains a major X-factor, while it also expects increasing market share for its members as oil supply from other sources “stagnate or decline.”
The group’s 2020 World Oil Outlook contains the bloc’s medium- as well as long-term oil demand and supply forecasts. “Assuming that the COVID-19 pandemic is largely overcome by next year, oil demand is projected to partly recover in 2021,” it said.
However, the report stressed that “in addition to the challenge of climate change, the COVID-19 pandemic, the related economic crisis and changing consumer behaviour have added additional depth to existing uncertainties surrounding future prospects for oil demand and supply.”
Post-2020, global oil demand is projected to continue growing at relatively high annual rates to reach a level of 103.7 million barrels per day by 2025, and “annual increments will be relatively high, especially in 2022 and 2023, at 2.1 million bpd and 1.5 million bpd, respectively.”
The report gives two main reasons for this expectation –
- A return to pre-COVID-19 economic growth rates over the next three years, particularly in the major developing countries.
- Demand “catching up,” especially in the sectors affected the most by lockdown restrictions during the outbreak, such as the aviation, road transport and industry sectors.
“The rest of the medium-term will be marked by further ‘normalization’ of demand growth in which longer-term trends and factors will come to the forefront, leading towards moderate levels of annual incremental demand of slightly above 1 million bpd,” OPEC predicted.
Over the long-run, the outlook will be influenced by factors such as economic development, the adoption of more stringent energy policies, faster penetration of energy-efficient technologies, the resource base, upstream investment, and the paths for the post-pandemic recovery.
“In this regard, India, China and other developing countries (DCs) with increasing populations and high economic growth play a key role in increasing energy demand while developed nations in the OECD are exerting more of their efforts on energy efficiency and low-carbon technologies,” OPEC said. “Consequently, nearly half of total energy demand growth is expected to come from India and China.”
Global oil demand is expected to increase by almost 10 million bpd over the long-term, rising from 99.7 mllion mpd in 2019 to 109.3 million bpd in 2040 and to 109.1 million bpd in 2045. This is a downgrade of more than 1 million bpd compared to the 2040 levels projected in the WOO 2019.
“The more pronounced effect of the COVID-19 pandemic on oil demand in the OECD has further exacerbated the divergent trends between the OECD and non-OECD regions,” OPEC said. OECD demand is expected to flatten around 47 million bpd between 2022 and 2025 before it starts a longer-term decline towards 35 million bpd by 2045.
In contrast; an expanding middle class, high population growth rates and stronger economic growth means higher expectations for potential demand in the non-OECD region. Oil demand is expected to increase by 22.5 million bpd between 2019 and 2045, and reach 74.3 million bpd in 2045. The largest contributor is projected to be India, adding around 6.3 million bpd between 2019 and 2045.
Separately, global natural gas demand is also expected to continue expanding in response to growing urbanization, rising industrial demand and greater competitiveness over coal in the power generation mix. Global demand for gas is expected to increase from nearly 67 million barrels of oil equivalent (mboe) per day in 2019 to 91 mboe per day in 2045, “resulting in natural gas being the second-largest contributor to the primary energy mix.”
The plunge in oil prices caused by the COVID-19 outbreak and economic recession led OPEC countries to implement a series of production cuts that will remain in effect until December 2020 at least. The fall in prices also sparked numerous bankruptcies in the U.S. shale energy sector. However, the OPEC report said that “despite being the most affected by shut-ins due to its inherent responsiveness to price, U.S. tight oil is expected to recover quickly as market conditions improve.”
It forecasts U.S. shale oil production will grow by 2.8 million bpd to 14.5 million bpd in the medium-term, followed by modest increases that plateau at 15.8 million bpd around 2030.
The OPEC report was bullish on the ability of its members to withstand competition, noting that “only a small number of non-OPEC producers show meaningful supply growth post-2025, including Canada, Qatar, Kazakhstan and Guyana. Most other non-OPEC producers see output stagnate or decline.”
It forecasts non-OPEC supply going from 61.8 million bpd in 2020 to peak of 71.8 million bpd in 2027, before falling back to 65.4 million bpd by 2045. As a result, OPEC supply is expected to increase from 33.8 million bpd in 2019, 33.2 million bpd in 2025, 35.9 million bpd by 2030, and 43.9 million bpd in 2045, “resulting in Member Countries’ share of global liquids rising from 34% in 2019 to 40% in 2045.”
—
Contact this reporter: brai@macenews.com
Content may appear first or exclusively on the Mace News premium service. For real-time email delivery contact tony@macenews.com. Twitter headlines @macenewsmacro.