Opec has raised its projection for global oil demand over the next few years to reflect "surprisingly robust growth in 2022 and 2023" and a slower oil-to-gas shift than previously forecast.
In the group's latest World Oil Outlook (WOO), global oil demand climbs to 105.5mn b/d in 2025 from 96.9mn b/d in 2021, whereas last year's WOO pegged demand at 103.6mn b/d in 2025. The upwards revision is partly down to "a strong focus on energy security issues leading to slower oil substitution — especially by natural gas — compared to past outlooks", Opec said.
The new report sees demand rising to 106.9mn b/d in 2027, with around 85pc of the 10mn b/d of growth in 2022-27 coming from non-OECD countries and much of that in the next couple of years.
Opec expects the pace of oil demand growth to slow down markedly in the longer term, with an average increase of just 200,000 b/d each year in 2030-35 and after that "a relatively long period of plateauing". It forecasts global demand at 108.3mn b/d in 2030, 109.5mn b/d in 2035, 109.8mn b/d in 2040 and 109.8mn b/d in 2045.
The regional variations within the outlook are stark. OECD oil demand grows this year and next before flat-lining in 2024 and steadily declining over the rest of the forecast period, leaving 2045 consumption 10.7mn b/d lower than in 2021. The main reasons are efficiency improvements and the substitution of oil by gas and renewable energy.
"This includes the significant penetration of EVs [electric vehicles] in the road transportation sector, ongoing electrification of residential and industrial sectors, and the penetration of alternative fuels in the marine and aviation sectors," Opec said.
In contrast, non-OECD demand rises by 23.6mn b/d over the period, driven by an expanding middle class, high population growth rates and stronger economic growth potential. The rise is led by China in the first few years of the forecast period, but the pace of Chinese growth decelerates after 2025 and even turns to a marginal decline in the last five years of the forecast period, when India takes over as the leading driver of non-OECD demand growth. Opec forecasts Indian demand to be 6.3mn b/d higher in 2045 than in 2021, whereas Chinese demand is only 3mn b/d higher.
Uncertain supply picture
Opec expects the global supply of liquids to increase to 105.7mn b/d in 2025, from 95.2mn b/d in 2021, and then to 109.8mn b/d in 2045. Opec members will account for 68pc of the growth out to 2045, leaving the group's market share at 39pc compared with 33pc last year.
Opec forecasts non-Opec liquids supply to rise to 71.4mn b/d in 2027 from 63.6mn b/d in 2021, to peak at 72.4mn b/d in 2030 and to decline thereafter. The US, Brazil, Guyana, Canada and Norway are projected to drive non-Opec supply growth over the next five years. Once US supply peaks in the late 2020s, Brazil and Guyana "are joined by Canada, Kazakhstan and Qatar as the primary sources of non-Opec liquids supply increments", according to the WOO.
Opec forecasts that $12.1 trillion of oil investment will be required in 2022-45, $9.5 trillion of that in upstream, $1.6 trillion in midstream and $1 trillion in downstream. This is higher than the $11.8 trillion forecast for 2021-45 in last year's WOO, with upwardly revised demand projections and assumed cost inflation in the short- to medium-term more than offsetting the forecast period being one year shorter.
Opec warned there is significant uncertainty surrounding the longer-term supply picture because of "major risks to the economic outlook, high inflation, energy policy goals being confronted with energy security challenges and questions regarding a perceived shortfall in upstream investment, all coupled with persisting and new geopolitical risks".
