Even a growing world economy isn’t enough to keep oil demand rising at ever-increasing rates, it seems.
The International Energy Agency, in its latest oil market report, predicts that the increase in oil demand will slow next year to a 1.3m barrel/day increase, from a 1.8m b/d rise in 2010.
The agency, which warned several times last year of a “supply crunch” due to falling investment in upstream production, is much more sanguine these days on the supply-demand balance.
Its new report notes some supply concerns, particularly around Iran, but says that investment in upstream production seems to be stable. “Whisper it quietly, but we might, just might, be in for some market stability for a while longer,” it says of its 2011 forecasts.
This decreasing rate of demand between 2009-10 and 2010-11 comes despite forecast on a rising rate of GDP growth; from 4.1 per cent in 2010 to 4.3 per cent in 2011. As the agency writes:
Despite economic recovery, oil demand growth slows to 1.3 mb/d next year from 1.8 mb/d in 2010, amid a continued structural shift away from oil in the OECD and the dual impact of improving end‐use efficiency and gradual phase‐down of economic stimulus in the non‐OECD.
However the decoupling of oil demand from GDP growth is part of a steady trend, despite the rise in demand growth from emerging markets:
In fact, over the next five years, growth slows steadily from +1.8m barrels per day between 2009 and 2010 to a mere +900,000 b/d between 2014 and 2015. From its medium-term oil and gas market outlook:
2009 – 2010: 1.6m b/d
2010 – 2011: 1.3m
2011 – 2012: 1.2m
2012 – 2013: 1.1m
2013 – 2014: 1m
2014 – 2015: 0.9m
And to what can we attribute the fall in growth?
In the short term, at least, a big China is part of it. From today’s report:
Non‐OECD Asia, the Middle East and Latin America will continue to command the lion’s share of oil demand growth in 2011, but at a somewhat slower pace when compared to 2010. This is mostly due to expectations that Chinese demand growth will moderate as the government gradually withdraws its fiscal and monetary stimuli. As such, China should account for about 30% of global growth next year, versus almost half this year.
Or, in graph form: