What we learn from OPEC’s World Oil Outlook 2017 report

The Organization of Petroleum Exporting Countries (OPEC) in Vienna, Austria last week launched its 2017 OPEC World Oil Outlook (WOO).

First published in 2007, the WOO offers a thorough review and assessment of the medium- and long-term prospects to 2040 for the global oil industry, as well as analysis of various sensitivities that have the potential to impact the petroleum industry in the years ahead.

“The past year has been an historic one for OPEC and the global oil industry. Since publication of the WOO 2016 in early November last year, the oil market has undergone fundamental change. It has been a period where the rebalancing of the global oil market has gathered vital momentum, buoyed by a number of important factors,” said Mohammad Sanusi Barkindo, OPEC Secretary General.

According to Ayed S. Al-Qahtani, the WOO 2017, presented by, Director, Research Division of OPEC, highlights the multi-faceted nature of the oil industry and the continued interdependence of all nations; the impact of the ongoing market rebalancing process, specifically on the medium-term outlook.

It also looks notes that oil will remain a fuel of choice for the foreseeable future; that security of supply and security of demand are very much two sides of the same coin; and the importance of exploring and evaluating the possible challenges, uncertainties, as well as opportunities, the industry might face.

In 2017 WOO, the oil cartel does not see peak oil by 2040 forecasting that oil is expected to remain the fuel with the largest share in the energy mix throughout 2040.

The organisation says demand will slow on account of growth of electric cars in developed countries hence hope for demand growth lies with developing countries. Developing countries will continue to lead demand growth, increasing by almost 24 mb/d, to reach 67 mb/d by 2040, it said.

It forecast that world consumption will rise from 95.4m barrels a day in 2016 to 102.3m b/d in 2022 –which is an upward revision of almost 2.3m b/d. Demand in the road transportation sector would be driven by the increasing car fleet in developing countries and declining oil use per vehicle in the OECD region, says OPEC.

In the short term, demand for OPEC crude will reach 33.10 million barrels per day (bpd) in 2019, the report said. While up from 32.70 million bpd in 2016, the 2019 figure is down from 33.70 million bpd forecast in last year’s report.

Long-term demand growth would come mainly from the road transportation (5.4 mb/d), petrochemicals (3.9 mb/d) and aviation (2.9 mb/d) sectors, OPEC said.

The report said that developing countries will continue to lead demand growth, increasing by almost 24 mb/d, to reach 67 mb/d by 2040. It is forecasting that oil demand in the road transportation sector would be driven by the increasing car fleet in developing countries and declining oil use per vehicle.

In developed countries, the reverse is seen. A shift within developing countries such as China away from oil-intensive heavy industry, energy efficiency policies, fuel switching in road transportation and a proliferation of alternative fuel vehicles will displace crude barrels OPEC said.

Non-OPEC supply is expected to grow from 57m b/d in 2016 to 62m b/d in 2022, which is higher than previously expected. Two-thirds of this growth is expected to come from the US alone. After 2022, however, non-OPEC growth begins to slow, tailing off in 2027 at 63.8m b/d, before a further fall to 60.4m b/d by 2040.

The demand for OPEC crude is anticipated to expand to 41.4 mb/d by 2040, its share of in total global liquids supply is estimated to increase to 46% by 2040, from 40% in 2016.

OPEC and some Non –OPEC members including Russia are cooperating to cut 1.8million barrels per day production to shore up oil prices. Barkindo called for sustaining this accord.

It however forecast that in the period to 2040, the required global oil sector investment is estimated at $10.5 trillion.

ISAAC ANYAOGU