OPEC has launched its annually updated World oil Outlook in Vienna, in which it describes its projections regarding the future of energy and oil market and the factors that will have an effect on them.
In its report OPEC mentioned that its Member Countries implement a production adjustment with a target of 32.5 million barrels a day with effect from 1 January 2017.
OPEC says that IMO regulations are expected to impact the pattern of medium-term oil demand growth. In particular, oil demand growth in 2020 is expected to be higher, at almost 1.4 mb/d. This is due to a combination of two factors.
The primary reason is the need for additional refinery runs to provide required fuels that lead to a surplus of high sulphur fuel oil (HSFO) volumes priced at a discount. It is assumed that these will mainly be absorbed by the power generation sector. Higher demand growth is also a direct consequence of volumetric processing gains related to switching from fuel oil to diesel.
On the refining side, it is assumed that the first step the global refining system takes will be to leverage its flexibility in producing diesel and low sulphur fuel oil (LSFO) without increasing overall refinery runs. However, the nature of the required processing changes leads to a need to process additional crude. Given that refiners will move to produce more distillate fuel, which could be blended with off-spec fuel oil, increasing runs are most likely to be seen in the regions with complex refining systems.
Furthermore, the following OPEC and non- OPEC Declaration of Cooperation through the Ministerial Meetings in Vienna (10 December 2016 and 25 May 2017) adopted a production adjustment of 1.2 mb/d for OPEC, together with a production adjustment of around 0.6 mb/d from participating non-OPEC producing countries, OPEC highlighted.
Other main points of the OPEC outlook include:
- Global population is estimated to increase from 7.3 billion in 2015 to 9.2 billion in 2040, with the 1.8 million additional population coming from developing countries,
- Global gross domestic product (GDP) between 2016 and 2040 is expected to increase at an average rate of 3.5% p.a, with the majority of it deriving from developing countries,
- The size of the global economy in 2040 is estimated to be 226% that of 2016. Developing countries are expected to account for three-quarters of the global GDP growth,
- A lead toward a long-term global convergence that focuses on energy efficiency and the increased adoption of clean modes of energy, including renewables, is expected,
- Technical advancements will continue to evolve and change the future energy panorama.
The report highlights that the evolution of energy markets over time is significantly impacted by government policies, which are used as mechanisms to stimulate change beyond purely market-driven forces.
The current trend is expected to lead toward a long-term global convergence that focuses on energy efficiency and the increased adoption of clean modes of energy, including renewables. Moreover, policies are also expected in terms of energy poverty eradication measures in developing countries.
Among the visible long-term global energy policy trends is the increasing penetration of electric vehicles (EVs), the tightening of fuel emissions standards, and the desulphurization in the road transportation, marine and aviation sectors.
Concluding, OPEC states that since the publication of the World Oil Outlook (WOO) 2016 in November last year the market has experienced significant changes that have had an impact on medium- and long-term estimates. For further details about the World oil Outlook, please click here.