Chemical products become the main driver of oil demand growth.
On April 23, the International Energy Agency (IEA) joined forces with the "International Petroleum Economics" monthly magazine to release the IEA "Oil Market Report 2018" in Beijing. The report predicts that the oil market will go through two stages in the next six years. Before 2020, the record crude oil supply of non-OPEC countries will exceed the growth of demand; but then to 2023, if investment continues to be insufficient, the world will act as a buffer. The effective spare capacity will only reach 2.2 per cent of demand, and oil prices may fluctuate and increase before new supply is put into production. Chemical products will be the main driver of oil demand growth.
The "Oil Market Report 2018" released this time analyzes and forecasts the international oil market in the next six years (2018-2023). The IEA believes that the current level of global oil inventories is very low and oil prices have rebounded. The rise in oil prices has brought returns to the countries that have reduced production, and has also promoted a new round of oil production growth in the United States. Coupled with the increase in production in countries such as Brazil, Canada and Norway, it is expected that by 2020, the record supply of crude oil in non OPEC countries will exceed the growth of demand, and the market demand can be met. However, the market still needs more investment to ensure the security of supply to meet the strong growth of oil demand in the future.
From the perspective of demand, in the first part of the outlook period, the global economic growth rate is 3.9, and the strong world economic growth supports the growth of oil demand. Oil demand is expected to grow at an average annual rate of 1.2 million barrels per day (1.4 million barrels per day is expected to increase in 2018 and 1 million barrels per day by 2023), and oil demand will reach 0.1047 billion barrels per day in 2023, an increase of 6.9 million barrels per day over 2017. Together, China and India will contribute nearly 50% of global oil demand growth. China's oil demand growth will slow down by 2023 compared with 2010-2017, while India's oil demand growth will increase slightly.
According to the report, chemical products are one of the main drivers of oil demand growth. The fastest growth in global oil demand growth is in chemicals, especially in the United States and China. The shale gas revolution in the United States has opened up a major source of cheap raw materials for the chemical industry. By 2023, 25% of the total global demand for new oil (about 1.7 million bpd) will come from ethane and naphtha.
In addition, the International Maritime Organization (IMO) bunker fuel specification changes will create significant challenges for the maritime and refining industries. The new regulations will result in high-sulfur fuel oil being replaced with marine light diesel or new low-sulfur fuel oil, and the impact of product structure changes is a major uncertainty in the forecast.
In terms of supply, investment in the upstream sector has recovered only slightly. Global upstream investment fell by 25% in 2015 and 2016, respectively. Investment in 2017 was the same as the previous year, and recent data show only moderate growth in 2018. Moreover, the vast majority of investments are in the light tight oil (LTO) sector in the United States. In addition, the annual global oil field aging will result in a loss of 3 million barrels per day of supply. On the one hand, the current investment should make up for the production reduction of old oil fields, maintain the current production, and at the same time meet the future demand growth.
Driven by light tight oil, U.S. oil production will increase by 3.7 million barrels per day in 2023, which will exceed half of the global total capacity increase of 6.4 million barrels per day. The total oil production of the United States will reach nearly 17 million barrels per day, almost equal to its domestic oil demand, becoming the world's largest oil producer. Brazil, Canada and Norway will also contribute to the supply growth. Non-OPEC producers can meet global demand growth by 2020. (International Oil Network)