Growth Economic Rates
According to OPEC Reports, the forecast for world economic growth in 2011 remains at 3.9% following off-setting revisions in the US , Japan and Euro-zone. Growth in the developing countries remains unchanged, with China growing by 9.0% and India by 8.1% this year. In 2012, the world economy is expected to grow by 4.1%, slightly higher than in 2011.
As for 2012, the OECD is forecast to grow by 2.5%, compared with this year’s growth of 2.1%. OECD growth is supported by the recovery in the Japanese economy, which is expected to expand by 2.5%. US growth is forecast at a higher 2.9%, while growth in the Euro-zone is seen slowing to 1.5%, due to plan austerity measures. The strong expansion in the developing countries is expected to ease somewhat, with China forecast at 8.5% and India at 7.7%.
Austerity measures, combined with high levels of both debt and unemployment, are likely to dent the fragile recovery in major OECD countries. In the developing countries, rising inflation has forced central banks to raise interest rates in an effort to address the overheating in their economies. In 2012, world economic growth is forecast to reach 4.1%, up from 3.9% in the current year. While the OECD is expected to gain momentum, developing countries are expected to expand at a lower rate than the strong growth seen this year.
Crude Oil Prices
The U.S. EIA Report (Short Term Energy Outlook, Aug. 2011) expects that West Texas Intermediate (WTI) crude oil spot prices which averaged $79 per barrel in 2010, will average $96 per barrel in 2011 and $101 per barrel in 2012.
EIA also expects oil markets to continue to tighten over the next two years given expected robust growth in world oil demand and slow growth in supply from non-Organization of the Petroleum Exporting Countries (non-OPEC) countries. Shortly, the growing demand in emerging economies will continue to outpace supply growth with continuing upward pressure on oil prices
These conditions result in an expected drawdown of global petroleum stocks and a call for increasing production from OPEC countries.
Among the major uncertainties that could push oil prices above or below our current forecast are: the continued unrest in producing countries and its potential impact on supply; decisions by key OPEC member countries regarding their production response to the global increase in oil demand; the rate of economic growth, both domestically and globally; fiscal issues facing national and sub-national governments; and China’s efforts to address concerns regarding its growth and inflation rates.
World crude oil and liquid fuels consumption grew to a record high 86.8 million barrels per day (bbl/d) in 2010.
The U.S. Department forecast for total world oil consumption grows by an annual average of 1.5 million bbl/d in 2011 and 2012. The supply from non-OPEC countries will grow with about 0.4 million bbl/d through 2012. Consequently, EIA expects that in order to meet projected demand growth the market will rely on both a drawdown of inventories and significant increases in the production of crude oil and non-crude liquids in OPEC member countries at a time when the disruption of crude oil exports from Libya and continuing unrest in other MENA countries already highlight significant supply risks.
In this regard OPEC reports forecast oil demand to grow by 1.36 mb/d in 2011, as the unsteady global economy has added risks to the forecast. In 2012, global oil demand is expected to grow at a slightly lower 1.32 mb/d.
The bulk of the increase in oil demand will take place in non-OECD countries, mainly China, India, the Middle East and Latin America. China will account for almost half of this growth. Chinese oil demand continues to show strong growth despite Chinese measures to cool its economy down.
There is a considerable range of uncertainty affecting next year’s oil demand forecast, due in large part to the pace of the economic recovery in OECD. The reduction in subsidies for petroleum products and higher taxes for transportation fuels in some developing countries could also negatively impact demand over the coming year. In contrast, the disruption in nuclear power generation in Japan is likely to lead to higher oil consumption.
Demand on OPEC oil
OPEC estimates world oil demand at about 87.8 million b/d in 2011, rising to 89 million in 2012, and estimates non OPEC supplies of about 52.6 million b/d increasing to 53.5 million b/d in 2012. The natural gas liquids are estimated to rise from 5.3 million b/d in 2011 to 5.7 million b/d in 2012. Thus, additional oil supplies required from OPEC will be within 30 million b/d in 2011 and 2012. EIA expects OPEC crude oil production will decline by about 250 thousand bbl/d in 2011, in large part due to the supply disruption in Libya.
EIA assumes that about one half of Libya’s pre disruption production will resume by the end of 2012, contributing to an overall increase in OPEC production of 500 thousand bbl/d in 2012. EIA projects that OPEC surplus crude oil production capacity will fall from 4.0 million bbl/d at the end of 2010 to 3.5 million bbl/d at the end of 2011, followed by a further decline to 3.3 million bbl/d by the end of 2012. OPEC non crude liquids production, which is not subject to production targets, is expected to increase by 520 thousand bbl/d in 2011 and by 410 thousand bbl/d in 2012.