Disruptions in hot spots such as Libya and Iraq have not been enough to override sluggish economic growth and plentiful supply in the world oil market, but the International Energy Agency predicts a tighter market ahead.
In its first detailed outlook for next year, the Paris-based IEA, the consuming countries' main energy think tank, predicted that "the oil outlook for 2015 … does not suggest any let up in market conditions". The prediction was part of its latest monthly Oil Market Report.
The IEA said there were signs of recovery in some refining sectors, a prospect for good economic growth next year and the threat of supply disruptions over the market, especially in the Middle East.
Growth is expected to come primarily from the developing economies, while demand in the richer OECD countries is forecast to slip back. "Non-OECD demand, having overtaken that of the OECD in 2014, is forecast to widen its lead in 2015, rising to an average of 48.2 million barrels per day, while OECD deliveries are projected to inch lower to 45.9 million bpd," the IEA said.
However, the most important element of the IEA’s predictions is world economic growth, which it bases on forecasts by other agencies such the IMF, the OECD, and the World Bank.
The IEA warned that the risks of forecasting ahead were currently “particularly high” because of geopolitical uncertainty, with political and security crises in many countries including Iraq, Ukraine, Libya, Nigeria and Venezuela. These situations could damage economic growth, which the IMF head Christine Lagarde last month warned may be less than previously predicted, the IEA noted.
Also adding to the agency’s wary outlook was the fact that economic growth continued to come primarily from developing countries.
The IEA said the rate of economic growth for non-OECD countries next year was expected to be 5.3 per cent, with the rate of expansion for OECD countries at 2.3 per cent. But the developing countries’ rate of growth had a much higher degree of unpredictability, with China this year being a case in point.
The IEA said that Chinese oil demand this year had been significantly weaker than the agency originally expected, leading it to cut its anticipated growth rate for this year to 3.3 per cent.
The IEA also expects Saudi Arabia and India to be among the top contributors to oil demand growth next year. Rapid demand increases for transport fuel in the kingdom, buoyed by its highest level of consumer confidence since 2012, should underpin demand growth of 3.6 per cent next year, growing demand to 3.2 million bpd.
In India, oil demand is expected to increase by 2.7 per cent to 3.6 million bpd as the economy picks up pace.
On the supply front, the IEA said worries about potential disruptions that pushed world oil prices up towards US$120 a barrel had eased.
Theagency expects supply from Non-Opec countries to remain high, particularly with the gains being made in North America from unconventional sources such as fracking, as well as offshore production.
With global demand growth forecast to slightly outpace those gains, the IEA expects the Opec output to remain steady at just below 30 million bpd as supply risks underpin prices.
amcauley@thenational.ae
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