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OPEC is cutting its forecast of demand for its own oil by 300,000 barrels a day in 2015 because of an increased supply of crude from other sources, particularly the United States and Canada.
The cartel’s secretariat in Vienna issued its first estimates for the year on July 10 in its latest monthly report on the global oil market. Its conclusion: Demand for crude from the 12 OPEC members should remain at an estimated 29.7 million barrels a day (MBD) through 2014, but drop to 29.4 MBD in 2015.
It said the oil supply from non-OPEC producers is expected to grow by 1.3 MBD to 57 MBD in 2015 at a time when the global demand for crude is estimated to be 92.3 MBD, up from 2014 by 1.2 MBD. As a result, OPEC won’t be strained to meet the worldwide demand for oil, the secretariat said in a statement.
The OPEC report doesn’t come as a surprise. Dependence on OPEC oil is declining as the United States and Canada use hydraulic fracturing, or fracking, to extract previously untapped supplies of crude from underground shale deposits.
Two major variables in this equation, however, are consumption in China and the United States, the world’s two biggest oil consumers. There are signs that China’s economy is slowing, and recovery from recession in the United States remains uneven. In fact, U.S. consumption remains the biggest variable, according to Eugen Weinberg, the director of commodities research at Commerzbank AG in Frankfurt. “The million-dollar question is what is going on with non-OPEC supply, and when we speak about non-OPEC we are speaking definitely about the U.S. market,” Weinberg told Bloomberg News. “Otherwise it’s a balanced outlook for the next year, and growth is likely to increase, though maybe OPEC are a little too optimistic on China.”
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OPEC isn’t alone in projecting less pressure on OPEC production in 2015. In Tokyo, Yoshikazu Kobayashi, the oil group manager at the fossil fuels and electric power industry unit of the Institute of Energy Economics-Japan, told Platts on July 10 that he expects the global demand and supply to lessen next year as oil demand rises by 1.4 MBD, less than the projected rise in supply.
Kobayashi’s figures differed slightly from OPEC’s, but both forecasts generally jibed.
Despite the recent increase of North American crude output, Rostam Qasemi, Iran’s oil minister, cautioned that non-OPEC oil output may not be as generous as many believe. He said not all countries are capable of extracting any shale reserves they may have, and stressed that reserves of U.S. shale oil “should not be exaggerated.”
“Everything must be assessed realistically,” Qasemi said July 10 in Frankfurt. “Based on a study by OPEC, we do not believe that there will be vast amounts of energy production in the U.S. In some countries it might not be possible to use those technologies.”
By Andy Tully of Oilprice.com
Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com