OPEC Slows its Global Oil Demand, Shale Production Higher

OPEC said shale oil production will grow considerably faster than expected over the next four years while global demand for OPEC’s crude will rise in the next two years more slowly than expected.

OPEC said shale oil production will grow considerably faster than expected over the next four years while global demand for OPEC’s crude will rise in the next two years more slowly than expected.

shale boom opec 2017

Energy demand

Reflecting the underlying assumed developments of the key drivers, total primary energy demand is forecast to increase by 96 mboe/d between 2015 and 2040, rising from 276 mboe/d to
372 mboe/d. In relative terms, this represents a 35% increase compared to the base year of 2015, with an average annual growth rate of 1.2 % during the forecast period.

  • India and China are the two largest contributors to future energy demand
  • Gas contributes most to future energy demand growth
  • Renewables are projected to record the fastest growth rate, but oil and gas are still expected to supply more than half of global energy needs by 2040
  • Energy poverty remains a critical issue

opec 2017 demand1

Oil demand

Long-term oil demand is expected to increase by 15.8 mb/d, rising from 95.4 mb/d in 2016 to 111.1 mb/d in 2040. Demand in the OECD region is anticipated to show a significant decline of 8.9 mb/d over the forecast period. Driven by an expanding middle class, high population growth rates and stronger economic growth potential, Developing countries’ oil demand is expected to increase by almost 24 mb/d. China is anticipated to continue to be the largest oil consumer over the forecast period, adding 6 mb/d to reach 17.8 mb/d by 2040. India will be the region with the second largest overall demand growth, adding 5.9 mb/d between 2016 and 2040. Indian demand growth is also set to witness the fastest average growth of 3.6% p.a.

Long term global oil demand growth is forecast to decelerate steadily, falling from an annual average of around 1.3 mb/d during the period 2016–2020 to only 0.3 mb/d every year between 2035 and 2040. This deceleration is a result of slowing GDP growth, assumed oil price increases, a structural shift of economies towards a more service-oriented structure, efficiency improvements as a result of tightening energy efficiency policies and/or technological improvements, and oil facing strong competition from other energy sources.

  • Light products will satisfy more than half of the long-term oil demand growth, while demand for gasoil/diesel has been revised downward
  • The transportation sector will remain the main consumer of oil products
  • Most demand growth comes from the road transportation sector, followed by petrochemicals and aviation
  • Expanding global car fleet outweighs improving efficiencies and increasing penetration of alternative fuel vehicles, but OECD an outlier

opec 2017 demand

Liquids supply

Non-OPEC supply in the Reference Case is forecast to grow from 57 mb/d in 2016 to 62 mb/d in 2022. Of this, 3.8 mb/d, or 75%, stems from US oil production alone, with the tight oil sector expected to continue its recovery after its dramatic 2016 slump. Brazil and Canada are the other significant contributors to supply growth, meaning incremental non-OPEC production is heavily focused on the Americas. While this WOO’s medium-term outlook is more optimistic than last year’s projected growth, the long-term forecast is largely unchanged. Total non-OPEC supply is projected to decline by 0.3 mb/d in the 2020–2040 period, with US tight oil production estimated to peak in the latter half of the 2020s.

  • US tight oil is by far the most important contributor to non-OPEC supply, but peaks after 2025
  • Tight oil’s increasing importance shows up in higher implied decline rates
  • Demand for OPEC crude is quite flat until 2025 and then rises sharply

opec 2017 liquids

Refining outlook

Around 7.6 mb/d of new refining capacity is likely to come online between 2017 and 2022, while 19.6 mb/d of new refining capacity is expected between 2017 and 2040. The majority of the new capacity is anticipated to be located in developing regions supported by growing oil demand. In the long-term, around half of the overall refining capacity (9.5 mb/d) is estimated to be added in the Asia-Pacific, while new capacities in the Middle East are expected to total around 3.7 mb/d, or some 20% of the total. Combined refining capacity additions in Latin America and Africa are estimated to be around 4.5 mb/d, or almost 25% of the total. At the same time, in the long-term new builds in developed regions are estimated at below 2 mb/d, which equates to less than 10% of the global additions.

It is also important to recognize that the projected long-term additions are driven more by the shift in global demand from industrialized regions to developing regions (mostly the Asia-Pacific) than by outright global demand growth itself. In addition, these new refineries in developing regions will compete with existing facilities in the US & Canada, Europe and Russia & Caspian as demand in those regions flattens before starting to decline.

  • Medium-term refining expansion points to increasing competition and the need for refinery closures
  • Capacity closures will be needed in the medium- and long-term in order to avoid falling refinery utilization rates
  • Due to increasing demand for clean and high quality products, secondary capacity additions have become a key gauge of the refining sector’s capability to meet demand

opec 2017 refin

Source: World Oil Outlook, the Organisation for the Petroleum Exporting Countries (OPEC), Bloomberg

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