The World Bank report predicts global demand for crude oil will increase moderately during the next 15 years without substantial price increases. The bank predicts oil demand will increase 1.6%/year from 69.1 million b/d last year to 87.9 million b/d in 2010. It said prices will remain volatile, although more stable than in the early 1980s, when oil prices were far too high to be sustained. Prices have become more stable due to the development of futures markets, slower oil demand growth, technologies that reduce costs, and unexpected production growth outside the Organization of Petroleum Exporting Countries. The bank said, Prices today are artificially high. And even if OPEC does increase them, it could not sustain them for long because market pressures will come to bear, as they did in the 1980s.
OPEC, non-OPEC oil
OPEC, which produced 17.1 million b/d last year, may boost oil production to keep up with non-OPEC competition. But by 2010 non-OPEC nations still will produce 48 million b/d of a total 88.1 million b/d. Its unlikely OPEC members will be able to force prices higher by reducing production capacity. The forecast assumes any price shocks in oil markets will be short lived and prices eventually will revert to precrisis levels. World Bank said the former Soviet Union clouds the outlook. FSU has the potential for substantial production growth if it can overcome political, economic, and legal problems. It is possible net exports from the FSU will fall short if a number of these issues are not resolved satisfactorily, the bank said. On the supply side, its hard to say what will happen in the absence of a satisfactory legal framework that would be required to generate large investments in the FSU. The report concludes that the relative balance of the global oil market may not change during the next several years. And while a number of risks point to higher oil prices, there is a large possibility that real oil prices could continue to drift lower during the next decade.
IEAs forecast
Meanwhile, the International Energy Agency predicts OPECs share of the world oil market will continue to slide next year as member countries cheat on production quotas. IEA said oil demand will increase more than 2% next year to 71.2 million b/d, but non-OPEC nations will keep the market competitive by increasing production more than 3% to 43.7 million. It observed that OPEC supplies totaled 25.52 million b/d last month, 1 million b/d over the official production ceiling. It was the highest OPEC production in 15 years. OPEC members will discuss the overproduction problem during informal talks in Venezuela this month and at a Nov. 21 meeting in Vienna. OPEC appears to have no choice but to maintain its production ceiling and hope member countries comply.
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