Opec sees demand for its crude falling to 2016

Demand for Opec’s crude will decline through to 2016 because of the weakening economic outlook and growing reliance on competing sources such as US shale oil deposits and natural gas liquids.Global need for fuel from the Organisation of Petroleum Exporting Countries will shrink to 29.7mn bpd in 2016, 1.4mn less than this year, the group said yesterday in its annual World Oil Outlook. The estimate for 2015 is 1.6mn barrels lower than that forecast in last year’s report. Opec predicts it may have more than 5mn barrels of daily spare production capacity as early as next year.“The economic recovery remains fragile, the risks stemming from the eurozone debt crisis appear to be heightening, economic growth in major developing countries is facing strong headwinds,” the group’s Vienna-based research department said. “Shale oil represents a large change to the supply picture.”Brent crude futures have tumbled 16% from this year’s peak amid concern that Europe’s failure to resolve its debt turmoil is hindering the world economy. Opec reduced estimates for global consumption in 2016 by 1mn barrels to 92.9mn a day, meaning demand will advance by 5.1mn, or 4.7%, from last year. Seventy percent of the increase will come from emerging nations in Asia, while fuel use in developed nations, which peaked in 2005, will decline by 0.9% to 45.7mn a day from this year to 2016, according to the report.Supplies from outside Opec will increase in excess of 4mn bpd from 2011 to 2016, reaching 56.6mn. The gain will be driven by output of US shale oil, Canadian oil sands, and crude from the Caspian Sea and Brazil. The assessment for non-Opec supply to 2015 is 2mn bpd more than in last year’s report.Opec’s 12 members will spend $270bn on 116 projects to maintain and increase production, boosting total output, including natural gas liquids, by 5mn barrels a day by 2016. The amount of spare crude capacity may surpass 5mn daily barrels next year or in 2014.The organisation also cut its global demand forecast for 2035, the end of the period covered by the report, by 2mn barrels to 107.3mn a day, as higher prices curb consumption and cars and ships use fuel more efficiently. Opec will need to bolster output by a “modest” 5mn bpd to meet world requirements by 2035, it said.Opec still expects its share of global oil will remain “approximately constant” at 32% through to 2035 as it boosts output of natural gas liquids, or NGLs, and supplies from gas-to-liquid projects.The group raised its price assumptions, projecting that Opec’s basket of crudes, a benchmark composed of blends from each member, will average $100 a barrel through to 2016 and then climb to $155 by 2035 because of higher costs to bolster production. The basket averaged $110 this year.