2010 a crunch year for world oil users

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THE world faces an oil ‘‘ sup­ply crunch’’ af­ter 2010 be­cause de­mand will out­pace the growth in pro­duc­tion from non-OPEC coun­tries, ac­cord­ing to the In­ter­na­tional En­ergy Agency. Out­put growth out­side of the Or­gan­i­sa­tion of Pe­tro­leum Ex­port­ing Coun­tries, led by Rus­sia and Brazil, will be coun­tered by a de­cline in Europe, the Paris-based agency said this week. That shrinks the cush­ion of ex­cess ca­pac­ity that OPEC mem­bers such as Saudi Ara­bia pro­vide, the agency said.

‘‘ De­spite four years of high oil prices, this re­port sees in­creas­ing mar­ket tight­ness be­yond 2010, with OPEC spare ca­pac­ity de­clin­ing to min­i­mal lev­els by 2012,’’ the IEA said in its Medium-Term Oil Mar­ket Re­port, pub­lished ev­ery six months. ‘‘ Low OPEC spare ca­pac­ity and slow non-OPEC pro­duc­tion growth are of sig­nif­i­cant con­cern.’’

Global oil de­mand is fore­cast to ex­pand by 1.9 mil­lion bar­rels a day, or 2.2 per cent a year on av­er­age, reach­ing 95.8 mil­lion bar­rels a day by 2012, the IEA said. The fastest growth will oc­cur in Asia and the Mid­dle East, it said. Brent crude oil fu­tures prices have av­er­aged $64.11 a bar­rel so far this year, down from an av­er­age $66.11 last year. It was $55.25 in 2005.

‘‘ Oil and gas price pres­sures look set to re­main in the com­ing years,’’ the IEA said. The agency, an ad­viser on en­ergy is­sues to 26 in­dus­tri­alised coun­tries, does not pub­lish a spe­cific price fore­cast.

In­vest­ment in coal and nu­clear power will bring an eas­ing pres­sure on the oil mar­ket af­ter about 2015, the group said. World oil­re­fin­ing ca­pac­ity will rise by 10.6 mil­lion bar­rels a day through 2012, which could help re­duce prices for petrol and other re­fined prod­ucts, it said.

Brazil, Rus­sia, Canada, Kaza­khstan and Azer­bai­jan will show the big­gest gains in pro­duc­tion among non-OPEC na­tions over the next five years, the agency said. Those five coun­tries will each ex­pand out­put dur­ing the pe­riod by at least 500,000 bar­rels a day, with Brazil gain­ing about 1 mil­lion bar­rels a day, the IEA pre­dicted.

The lag­gards among non-OPEC coun­tries will be the UK, where out­put will fall some 600,000 bar­rels a day over the pe­riod, fol­lowed by Nor­way and Mex­ico. In the US, oil pro­duc­tion will rise in the Gulf of Mex­ico, helped by BP Plc’s de­layed Thun­der Horse and At­lantis projects, the IEA said. The gains in the Gulf will be more than off­set by re­duc­tions else­where in the US.

Higher oil prices have helped lift shares of the world’s largest pro­duc­ers.

Over­all, the IEA re­duced its pro­jec­tion for non-OPEC sup­ply in 2011 by 1 mil­lion bar­rels a day since its last medium-term re­port in Fe­bru­ary be­cause of re­vi­sions to data and the re­duced re­li­a­bil­ity of ma­jor oil projects be­ing com­pleted on time.

Non-OPEC oil sup­ply, in­clud­ing bio­fu­els, is ex­pected to tally 52.6 mil­lion bar­rels a day in 2012, up from 50 mil­lion bar­rels a day in 2007.

Since that Fe­bru­ary re­port, more than 3.2 mil­lion bar­rels a day of new projects in 2007 through 2011 ‘‘ have seen their tim­ing slip, em­pha­sis­ing the scale of the prob­lem,’’ the IEA said.

The big­gest in­creases in non-OPEC pro­duc­tion will come from na­tions that pro­duce heavy oil, and from bio­fu­els, rather than so­called con­ven­tional crude oil fields, the re­port showed.

‘‘ Our fore­cast sug­gests that the non-OPEC, con­ven­tional crude com­po­nent of global pro­duc­tion ap­pears, for now, to have reached an ef­fec­tive plateau, rather than a peak,’’ the re­port said. ‘‘ Put an­other way, all of the growth in non-OPEC sup­ply over 2007-2012 comes from gas liq­uids, ex­tra heavy oil, bio­fu­els’’ and by 2012 some coal-to-liq­uids pro­duc­tion in China, it said.

Among OPEC na­tions, the IEA as­sumes there’ll be no ex­pan­sion of pro­duc­tion ca­pac­ity in Iran, Iraq and Venezuela over the next five years and no re­sump­tion of some 500,000 bar­rels a day of long-shut pro­duc­tion in Nige­ria’s delta swamps.

By 2012 the quan­tity of OPEC crude oil the­o­ret­i­cally needed to bal­ance world sup­ply and de­mand will rise to 36.2 mil­lion bar­rels a day, up from 31.3 mil­lion bar­rels a day for this year. The IEA doesn’t di­rectly fore­cast OPEC pro­duc­tion be­cause it can’t pre­dict OPEC pol­icy and quota lev­els. The con­straints in some OPEC na­tions along with project de­lays in other coun­tries and a strength­en­ing of world oil de­mand meant the IEA cut its fore­cast for OPEC’s spare pro­duc­tion ca­pac­ity in 2009 by some two mil­lion bar­rels a day since its Fe­bru­ary re­port.

OPEC spare pro­duc­tion ca­pac­ity, which had risen from low lev­els in 2004 to al­most three mil­lion bar­rels a day as of mid-2007, will in­crease through to 2009 and then de­cline to be­tween 1.55 mil­lion bar­rels a day and 2.18 mil­lion by 2012, the re­port showed.

OPEC’s spare, or un­used pro­duc­tion ca­pac­ity in­flu­ences oil prices be­cause that’s the cush­ion of ex­tra sup­ply that can be brought on­stream quickly when ma­jor dis­rup­tions oc­cur else­where in the world. Saudi Ara­bia con­trols the most spare ca­pac­ity.

‘‘ De­spite an in­crease in bio­fu­els pro­duc­tion and a bunch­ing of sup­ply projects over the next few years, OPEC spare ca­pac­ity is ex­pected to re­main rel­a­tively con­strained be­fore 2009 when slow­ing up­stream ca­pac­ity growth and ac­cel­er­at­ing non-OECD de­mand once more pull it down to un­com­fort­ably low lev­els,’’ it said.

The re­port also showed that Chi­nese oil de­mand will reach al­most 10 mil­lion bar­rels a day in 2012, com­pared with its do­mes­tic pro­duc­tion that year of about 3.9 mil­lion bar­rels a day. Bloomberg

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