Demand for oil is set to accelerate next year as the global economy gains momentum and will be met by rising supplies from the United States and Canada, according to the west’s energy watchdog.
However, geopolitical uncertainty in several key producing regions could upset this relatively benign outlook the International Energy Agency has warned in its widely followed monthly report.
“Supply risks in the Middle East and north Africa, not least in Iraq and Libya, remain extraordinarily high,” said the Paris-based organisation which advises major consuming nations on oil policy. “Whether in crude of product markets, there is little room for compliance”.
Sectarian strife in Iraq drove Brent to a nine-month high above $115 a barrel in June. Since then, the international oil benchmark has declined by almost 6 per cent on concerns about faltering demand from refineries in Europe and Asia.
At the same time, Libyan production is tipped to rise after rebels lifted the blockades of several key ports, fields and oil installations.
In spite of the current weak patch the IEA said prices remained at historically high levels and there was nothing to suggest a “turning of the tide just yet.”
“Global refinery throughputs already seem to be rebounding steeply, buoyed in part by record runs in Russia, capacity increases in Saudi Arabia, and a return from unplanned outages in the United States,” it said. “The global economy is still expected to gain momentum in 2015”.
Presenting detailed 2015 forecasts for the first time, the IEA said it expected global oil demand to grow by 1.4m barrels a day next year, up from 1.2m b/d in 2014.
It said developing nations, or non OECD countries, would lead the gains, with demand rising to an average of 48.2m b/d. In contrast, demand in rich countries would inch lower to 45.9m b/d.
“Many non-OECD economies are entering a stage of development where rising household incomes and expanding industrial activity typically fuel relatively fast oil consumption growth,” the report said.
On the supply side, the IEA expects non-Opec supply growth to average 1.2m b/d next year, in line with expansions in 2013 and 2104. As a result, forecast demand for Opec crude would fall in 2015 to 29.8m b/d, from 29.9m this year.
Turning to Iraq, the IEA said the sectarian violence had not materially affected production in June, with output down 260,000 b/d to 3.17m b/d mainly because of the closure of the country’s biggest oil refinery.
Exports were also lower, nearly 300,000 b/d below the initial 2.7m b/d loading schedule for the month, due to logistical problems and maintenance at the Basra oil terminal in the south of the country.
However, production from the semi-autonomous northern Kurdistan region increased by 130,000 b/d to 360,000 b/d in June as ships began to load crude delivered by its independent pipeline at the Turkish Mediterranean port of Ceyhan. Barring any further technical problems, the IEA said southern Iraqi exports would recover to 2.6m b/d this month.
The IEA said production in Saudi Arabia, the world’s biggest oil exporter, had averaged 9.78m b/d in June, up 70,000 b/d from May.
“Contrary to seasonal patterns, the Kingdom barely hiked production in June, a sign that demand for its crude may not have significantly increased,” the report said.
Saudi production usually increases in the summer to meet higher domestic demand from power stations. Last year crude burnt in power stations during the peak air-conditioning period (April to September) averaged 615,000 b/d.