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 The Organization of the Petroleum Exporting Countries, which a year
ago refused to cut supply to retain market share against higher-cost
rivals, in its 2015 World Oil Outlook raised its global supply
forecasts for tight oil, which includes shale, despite a collapse in
prices.
Demand for OPEC crude will reach 30.70 million barrels per day (bpd)
in 2020, OPEC said, lower than 30.90 million bpd next year. The
expected demand from OPEC in 2020 is about 1 million bpd less than
it is currently producing.
Oil has more than halved its price in 18 months and sank to an
11-year low of $36.04 a barrel this week. The drop has helped to
boost oil's medium-term use, although OPEC said the demand stimulus
of low crude prices will fade over time.
"The impact of the recent oil price decline on demand is most
visible in the short term," OPEC Secretary-General Abdullah al-Badri
wrote in the foreword to the report. "It then drops away over the
medium term."
OPEC is increasingly divided over the merits of the 2014 shift to a
market-share strategy, which was led by Saudi Arabia and its Gulf
allies, and at a Dec. 4 meeting failed to agree a production ceiling
for the first time in decades.
Nonetheless, the report shows that the medium-term outlook - from
OPEC's point of view as the supplier of a third of the world's oil -
has improved. In the 2014 edition, demand for OPEC crude was
expected to fall to 29.0 million bpd by 2020.
OPEC said it stopped modeling work on the report in mid-year, since
when it has updated its forecast of 2016 non-OPEC supply to a
decline. OPEC figures in the report do not include Indonesia, which
rejoined in December.
The main figures in the report showing OPEC medium-term market share
under pressure are unchanged from those in a confidential OPEC
report Reuters obtained in November.
RESILIENT SHALE
OPEC initially downplayed the impact of shale oil, although its
annual outlook in 2012 acknowledged for the first time that the
effect could be "significant".
Years of high prices - supported by OPEC's former policy of cutting
supply – helped make non-conventional oil such as shale viable. In a
change of tack from previous reports, OPEC now says many projects
work at lower prices too.
"The most prolific zones within some plays can break even at levels
below the prices observed in 2015, and are thus likely to see
continued production growth," the report said.
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Global tight oil output will reach 5.19 million bpd by 2020, peak at
5.61 million bpd in 2030 and ease to 5.18 million bpd in 2040, the
report said, as Argentina and Russia join North America as
producers.
Last year's estimates were 4.50 million bpd by 2020 and 4 million
bpd by 2040.
Under another, upside supply scenario, tight oil production could
spread to Mexico and China and bring supply to almost 8 million bpd
by 2040, OPEC said. As recently as 2013, OPEC assumed tight oil
would have no impact outside North America.
The report supports the view that OPEC's market share will rise in
the long run as rival supply growth fades. OPEC crude demand is
expected to reach 40.70 million bpd in 2040, amounting to 37 percent
of world supply, up from 33 percent in 2015.
OPEC nudged up its medium-term world oil demand forecast, expecting
oil use to reach 97.40 million bpd by 2020, 500,000 bpd more than in
last year's report.
But factors including slower economic growth, the limited share of
the crude cost in pump prices and the falling value of some domestic
currencies against the dollar will limit the demand response to
lower crude prices, OPEC said.
By 2040, OPEC expects demand to reach 109.80 million bpd, 1.3
million bpd lower than a year ago, reduced by energy efficiency and
climate-change mitigation efforts.
Only a gentle recovery in oil prices is seen. OPEC's basket of crude
oils is assumed in the report at $55 in 2015 and to rise by $5 a
year to reach $80 by 2020.
(Editing by William Hardy)
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