x Abu Dhabi, UAEMonday 24 July 2017

OPEC sees 20-year oil slump

Oil demand in developed economies peaked in 2005 and will fall for at least the next two decades, according to OPEC's latest long-term forecast.

Oil demand in developed economies peaked in 2005 and will fall for at least the next two decades, according to OPEC's latest long-term forecast. Mohammed Hamel, the head of OPEC's energy studies department, said in Vienna yesterday that oil demand from members of the Organisation for Economic Co-operation and Development (OECD) would fall below that from developing countries in about 2015. A drastic reduction in OECD oil consumption in the past two years, led by a big drop in North America, had forced a "major reassessment" of the group's oil demand outlook for the next five years, Mr Hamel added. By 2013, world oil demand of 87.9 million barrels per day (bpd) would be only 4 per cent higher than the 84.2 million bpd projected for this year, or 5.7 million bpd lower than OPEC expected last year. The oil exporters' organisation also cut 7.7 million bpd from its forecast of global oil demand in 2030. It now expects demand to rise by just 9 per cent over the 22-year forecast period - to 105.6 million bpd in 2030 from 85.6 million bpd last year - instead of reaching 113.3 million bpd. "Efficiency improvements are greater than previously estimated and this, together with the downward revision to the medium-term expectations due to the current global recession, has led to a significant downward revision for oil demand in the longer term," OPEC said in this year's edition of its annual World Oil Outlook, released yesterday. The high oil prices seen last year "led undoubtedly to some demand destruction", the group added. Lower economic growth is affecting oil consumption in all sectors, it said. OPEC predicted fewer vehicles on the world's roads than previously expected, rising fuel efficiency due to altered driving behaviours and the types of vehicles motorists will choose, and reductions in passengers and freight carried by airlines. In industry, manufacturing cutbacks would lead to less oil consumption than previously forecast, especially in the petrochemicals sector, while lower global trade levels would reduce fuel use by ships. Less oil would also be used to generate electricity. Over the long term, the group expected almost 80 per cent of increased oil demand to come from "developing Asia", with transport being the most important source of rising demand. But even though more people in countries such as China and India would be owning and driving cars, energy poverty in the developing world would remain a "pressing issue" over the forecast period, OPEC said. "Focusing just on oil, per capita oil use in developing countries will remain far below that of the developed world," it predicted. "For example, oil use per person in North America in 2030 will still be more than 10 times that of South Asia." Mr Hamel said: "A large share of the world's population will unfortunately lack access to basic energy services." In OPEC's view, the world still has more than enough oil to meet future demand. Reserves in OPEC countries increased last year by 75 billion barrels to more than 1 trillion barrels, easily offsetting production, said Fuad al Zayer, the head of OPEC's data services department. Mr al Zayer attributed much of that increase to the certification of heavy oil reserves in Venezuela. OPEC said: "The key issue is not related to availability but to deliverability and sustainability, as well as the uncertainties surrounding the extent to which increases in the demand for crude will actually materialise." For companies and governments facing decisions on oil development, the investment climate would remain uncertain for the next few years, the group predicted, raising supply concerns. "The risks are unquestionably high, and we must remain vigilant," Mr Hamel said. Dr Abdulla el Badri, the OPEC secretary general, predicted that "normal" growth in global oil demand would resume in 2012, and OPEC's biggest challenge would continue to be providing the world with enough oil. "Prices at this time are comfortable but they do not encourage new investment," Dr el Badri said. "They are not at the level we are really shooting for." tcarlisle@thenational.ae