Opec forecasts slowing oil demand to 2040 in global outlook report
Opec released its World Oil Outlook report on Tuesday.
Oil prices are hovering near their highest level since early June 2015, despite Opec dampening hopes of a subsiding oil glut by forecasting slowing demand and pointing to unexpected growth in US shale production.
In its annual World Oil Outlook report, Opec said it expects global oil demand to fall from an annual average of 1.3 million barrels a day (mb/d) between 2016 and 2020, to 300,000 barrels a day by 2035 to 2040.
“This deceleration is a result of slowing GDP (gross domestic product) 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,” Opec’s report explained.
The oil cartel added that shale gas production – also referred to as “tight oil” for being extracted from shale or tight sandstone – had outstripped projections.
“Most strikingly, US tight oil production has exceeded previous growth expectations and is currently forecast to contribute to a rise in overall US liquids by some 0.6 mb/d in 2017 and then 0.9 mb/d in 2018.
“This contrasts with an annual decline in US liquids in 2016,” the report added.
Renewables, meanwhile, are projected to record the fastest annual growth rate at 6.8%, but their share of total energy supply is still expected to stand at 5.4% by 2040 “given their low initial base”, the report said, adding that Opec was “greatly supportive” of ongoing development in the industry.
Overall, the use of fossil fuels — which accounted for 81% of the global energy mix in 2015 — is expected to decline by 2040, though they will still account then for 74% of all energy used.
It caused a slight dip in Brent crude, which fell 0.5% in afternoon trading.
But prices were still hovering at their highest level in over two years at 63.75 dollars, having jumped amid uncertainty in the Middle East after a string of arrests in Saudi Arabia over the weekend.
The country’s newly-established anti-corruption committee oversaw the arrests of top princes and officials, saying evidence of widespread corruption had been uncovered.
Billionaire Prince Alwaleed bin Talal, two of the late King Abdullah’s sons and powerful businessmen, including the chairman of the Binladin Group and the founder of the MBC Group of Arabic channels, are reportedly among those arrested.
Oil prices have been climbing steadily higher since Opec agreed to cut output for the first time since 2008 from the start of this year.
They were joined by a group of major producers outside of the cartel, including Russia, Mexico, Azerbaijan and Oman, in a move that was meant to create a better balance between supply and demand.
Together, those commitments helped bring oil prices from around 56 dollars per barrel at the start of January to around 63 dollars today.
Opec secretary general Mohammad Sanusi Barkindo applauded the output cap in the organisation’s report, saying that it was “central to the rebalancing process that the market has undergone this year”.
“There is now global recognition that without such adjustments by Opec and non-Opec nations, the market would have experienced further extreme volatility, which would have had far-reaching negative consequences for producers, consumers, investors, the industry and the global economy at large.”
Following the report’s release, investors are expected to turn attention to Opec’s next meeting slated for the end of November in Vienna.