OIL MARKET OUTLOOK 2015
The oil market outlook in 2015
Despite some weakness in the first half of the year, the world economy continues to recover. Global GDP growth in 2014 is now forecast at 3.1%, slightly higher than the estimated 2.9% for 2013. The US experienced a surprisingly large contraction in economic activity in the first quarter due to severe winter weather, leading to a downward revision in US GDP growth to 1.6% from 2.4% previously. However, with the US economy expected to rebound and continued large monetary stimulus in the Euro-zone and Japan, the OECD is seen growing by 1.7% in 2014 and 2.0% in 2015.
China's GDP is forecast to grow by 7.2% in 2015 from 7.4% in the current year. India and other major emerging economies are forecast to recover. This, in combination with the expected improvement in OECD economies, leads to a global GDP growth forecast of 3.4% in 2015 (Graph 1). However, a number of uncertainties remain, ranging from the consequences of monetary policies in the developed economies to the threat of deflation in the Euro-zone, as well as the risk of geopolitical tensions and potential spillovers.
World oil demand in 2015 is forecast to grow by 1.2 mb/d to average 92.3 mb/d, higher than the growth of 1.1 mb/d estimated for 2014 (Graph 2). For the first time since 2010, OECD oil demand is expected to grow, increasing by 40 tb/d, with Americas being the only OECD region exhibiting growth. Europe is expected to decline further, but at a slower pace, while Asia-Pacific oil demand will continue to contract. Non-OECD oil demand growth is expected to be around 1.2 mb/d, coming mainly from China, the Middle East, and Other Asia. In terms of products, consumption growth will be primarily driven by increased use of diesel oil and gasoline in the transportation industry, as well as to a lesser extent LPG and naphtha for petrochemical feedstocks. However, factors that could impact oil demand growth include the pace of economic activities in major consuming nations; the strength of substitution toward natural gas and other fuels; efforts to reduce subsidies; and ongoing policies to enhance fuel efficiency, especially in the transportation sector.
Non-OPEC supply is expected to grow by 1.3 mb/d in 2015 to average 57.0 mb/d, lower than this year's estimated increase of 1.5 mb/d. OECD Americas is expected to see the highest growth, with contributions from the US and Canada, followed by Latin America due to the increase in Brazilian production. However, a high level of uncertainty is associated with the 2015 non-OPEC supply forecast coming from geopolitical developments; regulatory and environmental concerns; and technical challenges such as sharper-thanexpected decline rates, particularly in tight oil plays, and unplanned shutdowns. These factors could impact supply projections in either direction. OPEC NGLs and non-conventional oils are expected to increase at a faster pace in 2015, rising 0.20 mb/d to average 6.0 mb/d, following growth of 0.15 mb/d this year.
The above forecasts suggest a demand for OPEC crude of 29.4 mb/d in 2015, a decline of 0.3 mb/d from the current year. Therefore, even if next year's world economic growth turns out to be better than expected and crude oil demand outperforms expectations, OPEC will have sufficient supply to provide to the market.
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