Oil supply will outstrip an acceleration in demand growth next year as production outside of OPEC expands at the fastest pace in 20 years, the International Energy Agency predicted.
World oil consumption will climb by 1.2 million barrels a day next year, up from 930,000 a day in 2013, the IEA said in its first monthly report with forecasts for 2014. Supplies from outside the Organization of Petroleum Exporting Countries will jump by 1.3 million barrels a day amid booming output in North America, shrinking the need for crude from the 12-member producer group, according to the report.
The assessment should “give bulls some cause for alarm,” the Paris-based adviser to oil-consuming nations said. “While demand growth is also forecast to pick up momentum,” this “will still fall short of forecast non-OPEC supply growth.”
Brent crude has lost about 2 percent this year, trading today near $109 a barrel on the London-based ICE Futures Europe exchange, as economic stagnation in Europe, slowing expansion in China and threats to recovery in the U.S. constrain fuel consumption. Dependence on OPEC is dwindling as new drilling techniques enable the U.S. and Canada to unlock reserves from rock formations deep underground.
Global demand will average 92 million barrels a day in 2014, advancing by 1.2 million barrels a day, or 1.3 percent from this year, according to the IEA report.
The agency said that today’s forecast hasn’t yet incorporated a reduction to 2013 economic growth estimates made by the International Monetary Fund on July 9. The Washington-based IMF trimmed its projection for global growth this year to 3.1 percent, from 3.3 percent.
The agency boosted its estimate for demand in 2013 by 220,000 barrels a day from last month’s report, estimating that oil use will expand by 930,000 barrels a day, or 1 percent, to 90.77 million a day this year. The revision, the third increase to the 2013 outlook to be made this year, was driven by unusually cold weather in the second quarter.
“It’s a balanced outlook for the next year, and growth is likely to increase,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said before the IEA report was released. “The million-dollar question is what is going on with non-OPEC supply,” said Weinberg, who predicts that Brent will average $116 a barrel in 2014.
Production outside OPEC will expand by 1.3 million barrels a day to 55.9 million a day in 2014, with almost 1 million barrels of the increase coming from North America, according to the report. Growth in Brazil, Kazakhstan and South Sudan will also help offset declines in other non-OPEC regions.
The expansion means that demand for OPEC’s crude will decline next year to 29.4 million barrels a day, about 200,000 a day less than will be required this year, and 1.2 million a day less than the organization pumped in June. Disruptions in Libya, Nigeria and Iraq cut the group’s production by 370,000 barrels a day last month.
The IEA’s estimate for this “call on OPEC” in 2014 is 200,000 barrels a day lower than that made by the group in OPEC’s own monthly market report, published yesterday. OPEC’s projection for world demand growth next year is also about 200,000 barrels a day less than the agency’s at 1 million barrels a day. The organization meets next on Dec. 4.
Total inventories of crude and refined products in industrialized nations are at a “small deficit” of 12.9 million barrels to their five-year average, even after increasing by 4.8 million barrels a day in May to 2.68 billion barrels, according to the report.
-- Editors: Stephen Voss, Stephen Cunningham