The International Energy Agency has sharply cut its medium-term global oil demand forecast and predicts that the oil market will tighten from 2012 onwards, but that the situation will be counterbalanced by ample spare capacity.
In its Medium-term Oil Market Report 2009 released on June 29, the Paris-based IEA cut its global oil demand projection through 2013 by 3.3 million bpd from its previous forecast released last December.
The agency says oil demand is falling even in developing countries.
The IEA projects annual demand growth of anywhere between 0.4 percent and 1.4 percent after 2009.
The agency’s projections are based on different assumptions regarding how the global economy will recover and probably grow.
IEA says the fallout from the recession may lead to a lasting structural shift in energy consumption, although it’s hard to tell right now what those shifts are.
“It may be too early to cite a definitive structural downshift in oil use, but events such as GM and Chrysler filing for bankruptcy protection in the U.S., and further rationalization affecting transport and power generation fuel use provide some hints that it will occur,” the report read.
The agency said that Asia and the Middle East will continue to generate the bulk of demand growth and demand from developing countries, potentially eclipsing that within the developed countries by 2014.
On oil supply, the IEA projects global supply capacity will grow by 4.0 million bpd in the 2008 to 2014 period, which is 1.5 million bpd less than the agency’s previous outlook a year ago. Most of this capacity increase will come from members of the Organization of Petroleum Exporting Countries as well as rising production of biofuels.
The agency forecasts biofuels output will increase from 1.5 million bpd in 2008 to 2.2 million bpd in 2014, with global biofuel capacity potentially attaining over 3.0 million bpd.
Non-OPEC supply is projected to level off at 50 to 51 million bpd due to various constraints, including spending curbs and project delays, the IEA says.
In the natural gas sector, the IEA says that after a 1 percent increase in 2008, gas demand from developed nations fell by 4 percent during the first quarter and is expected to further decline through the year.
“2009 bears the legacy of this last period as the world goes through the unprecedented combination of a global recession and financial crisis,” says the IEA report. “The Natural Gas Market Review projects that for the first time in 50 years, the world will witness a drop in global gas demand.”
On the supply side, 60 billion cubic meters of liquefied natural gas (LNG) capacity are planned to come online this year.
“Yet with spot prices in the U.S. bottoming out at below $4 per million British thermal units, the question for 2009 is how rapidly U.S. unconventional gas production-which is generally higher cost and therefore less competitive-will decline,” says the report.
