Mideast crude & condensate exports to increase to almost 23 mb/d in 2045: OPEC World Oil Outlook
By Rupkatha Chaudhuri
OPEC launched its 2021 World Oil Outlook (WOO) in Vienna, Austria on Tuesday, September 28. According to the Outlook, after the drop in 2020, global crude and condensate trade is projected to reach levels above 38 mb/d in 2025 and 2030 and 40 mb/d and above from 2035 onwards. This is supported by increased oil demand in the Asia-Pacific and rising crude and condensate supply in the Middle East.
In the longer-term, Middle East crude and condensate exports are projected to increase to almost 23 mb/d in 2045, up from 18.5 mb/d in 2019, and in line with rising demand for OPEC liquids. Consequently, the share of the Middle East in the global crude and condensate trade increases to 57% in 2045, from 48% in 2019.
The report says non-OECD primary energy demand is expected to constitute well over 70% of global primary energy demand in the long-term, growing from 174 million barrels of oil equivalent a day (mboe/d) in 2020 to 252 mboe/d in 2045. This growth is mainly attributable to increasing populations and growing economies in Asia, Africa and the Middle East.
“For the OECD region, energy demand is set to flatten in the long-term. This underscores a further decoupling from economic growth due to structural changes and a policy push that continues to place increasing emphasis on energy efficiency and the deployment of low-carbon energy technologies. After a partial recovery from the impact of the Covid-19 pandemic, energy demand in the region is set to peak in the medium-term before declining to around 102 mboe/d by 2045, reaching a level similar to that seen in 2020,” the OPEC Outlook says.
It further states that the global oil demand increase over the medium-term period (2020-26) is estimated at 13.8 million barrels a day (mb/d). However, almost 80% of this incremental demand will materialize within the first three years (2021-23), primarily as part of the recovery process from the Covid-19 crisis. OECD oil demand is expected to increase by almost 4 mb/d in the period to 2026.
“However, all of this increase will not be sufficient to return to pre-Covid-19 demand levels. Non-OECD demand is anticipated to increase by almost 10 mb/d over the medium-term, with around half of this increase needed to offset the demand decline in 2020. Using 2019 as the base year for comparison would result in incremental demand of 4.4 mb/d in 2026.”
The Outlook says that in the medium-term, 6.9 mb/d of new refining capacity is expected, in line with strong demand prospects in developing regions. Given global oil demand trends, this would lead to a distillation capacity overhang by 2026.
However, during the ongoing rationalization wave, accelerated by the 2020 demand shock and the strategy shifts of some oil companies, around 4.5 mb/d of refining capacity could be shut in, mostly in developed regions. This should help balance out the downstream market in the medium-term.
Global refining distillation additions are projected at 14 mb/d between 2021 and 2045, of which 6.9 mb/d is in the medium-term (by 2026) and 7.1 mb/d beyond 2026. In line with oil demand patterns, almost 95% of the total additions is expected in developing regions, including the Asia-Pacific (6.4 mb/d), the Middle East (2.8 mb/d), Africa (3 mb/d) and Latin America (1 mb/d). However, the rate of distillation additions is expected to decelerate considerably throughout the outlook period with minor global additions beyond 2040.
Developments during the past year have made it clear that there are a number of uncertainties related to the main factors affecting future oil demand. In respect to the global economy, the risk for oil demand over the medium-term is skewed to the downside and primarily related to a potentially extended pandemic situation. In the long-term, the risk is rather symmetric with each path deviating from the Reference Case by more than 6 mb/d at the end of the forecast period.
The faster implementation of more stringent policies and penetration of energy efficient technologies could reduce future oil demand by more than 8 mb/d in 2045, compared to the Reference Case. Oil demand in the road transportation sector alone could be reduced by some 3 mb/d in 2045.
Lower and Higher Supply Cases indicate a range of 7.5 mb/d in the medium-term, and as much as 10 mb/d in the long-term, heavily skewed to the downside. In the Lower Case, US tight oil declines gradually until a modest rebound is seen in the latter part of the 2020s, although it never again reaches pre-pandemic levels. This opens up a potential downside of nearly 4 mb/d at peak. In other non-OPEC countries, project cancellations, lower investment and to some extent policy measures curb as much as 3 mb/d in the long-term. The Higher Supply Case projects a US tight oil production upside of around 1 mb/d, while output in other non-OPEC countries adds 2.5 mb/d in the long-term.
OPEC secretary general Mohammad Sanusi Barkindo, said in the forward of the report that the past year has been one of continuing uncertainty related to the pandemic, but noted the benefits of the Declaration of Cooperation (DoC) production adjustments in bringing down inventory levels, and the market being buoyed by the rollout of vaccines and further global fiscal stimulus.