LONDON – THE world economy faces a tight oil market in the next five years. This is due to a combination of accelerating consumption and output falls in mature areas, such as the North Sea, and long delays in new production projects.
The warning yesterday by the International Energy Agency (IEA), the energy watchdog, comes as oil prices surge above US$76 a barrel, to within US$2.50 a barrel of last summer’s all-time high of US$78.65.
The IEA said in its Medium Term Oil Market Repot that ‘oil looks extremely tight in five years’ time’ and there are ‘prospects of even tighter natural gas markets at the turn of the decade’.
The IEA forecast that demand will grow at an annual rate of 1.9 per cent during the next five years, to reach 95.8 million barrels per day (bpd) in 2012. China and other emerging countries will lead the increase in consumption.
The new forecast sees oil production growth in the next five years outside the Organisation of Petroleum Exporting Countries (Opec) at 1 per cent, roughly half the rate of demand growth projections.
The widening gap between demand and non-Opec supply will force Opec, the oil cartel which controls about 40 per cent of global oil output, to sharply increase its production between this year and 2012.
The IEA estimates Opec would have to supply about 36.2 million bpd in five years, up from today’s 31.3 million bpd. That would reduce the cartel’s spare capacity to 1.6 per cent of global demand, down from 2 per cent this year.
‘Despite four years of high oil prices, this report sees increasing market tightness beyond 2010, with Opec’s spare capacity declining to minimal levels by 2012.’
FINANCIAL TIMES