OPEC Forecasts Sharp Rise in Oil Demand in 2018

SEATTLE (Oil Monster): The Organization of Petroleum Exporting Countries (OPEC) has released a new report that forecasts significant jump in oil demand in 2018. The OPEC ‘World Oil Outlook’ Report compiled by its in-house analysts predicts tremendously growing market deficit. It predicts a jump of nearly 400,000 barrels a day to 33.4 million barrels a day, which in turn will exceed the current production.

According to OPEC, the significant changes experienced by the market since the publication of the ‘World Oil Outlook’ last year has impacted the medium and long-term oil demand estimates. It predicts that developing countries are most likely to lead the long-term economic growth, whereas weaker demographics are likely to constrain the growth in the Organization for Economic Co-operation and Development (OECD) region.

The predicted expansion in developing countries will result in 35% growth in global energy demand by 2040, upon comparison with 2015 levels. The energy demand in developing countries is forecast to grow at an average rate of 1.9% per annum over the period until 2040. Meantime, OECD region is projected to report slower energy demand growth rate of 0.1% per annum. Eurasia region is likely to witness annual growth of 0.9% in energy demand.

According to OPEC, the medium term oil demand growth is likely to remain robust, rising from 95.4 mb/d in 2016 to 102.3 mb/d in 2022. On long-term basis, the oil demand growth will decelerate to total 111.1 mb/d by 2040. The road transportation sector will continue to remain as the key consumer of oil products, followed by petrochemicals and aviation industries.

OPEC expects nearly 7.6 mb/d of new refining capacity to come online between 2017 and 2022. Also, nearly 19.6 mb/d of new capacity is estimated to come online between 2017 and 2040. Majority of these new capacities will be located in the developing regions. As per estimates, Asia-Pacific region is expected to add 9.5 mb/d capacities, followed by the Middle East region with 3.7 mb/d. Latin America and African regions are likely to add around 4.5 mb/d of new capacities by 2040.

In the near-term, the increased oil production in the US and Canada is likely to raise the total volume of crude exported to world markets. The international crude trade may drop slightly by 2025 with more countries switching to own refineries capable of processing crude locally. However, the sharp rise in demand may lift the global oil trade in the years leading to 2040.