Market Report Series Oil 2017 SIEW 2017 launch - 28 March 2017
Oil demand continues to grow but at a slower pace 2.0 Global oil demand growth 2014-2022 1.5 1.0 0.5 0.0 2014 2015 2016 2017 2018 2019 2020 2021 2022 China India Rest of the world China & India account for 46% of world demand growth to 2022. Global oil product demand passes 100mb/d in 2019.
kb/d Petrochemicals and transport make up the majority of the growth 2 500 2 000 Other products Gasoil/FO 1 500 1 000 500 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 Gasoline LPG/naphtha Global oil demand growth Both areas particularly supported by ongoing and accelerating economic growth
mb/d Emerging markets dominate growth while OECD demand wanes 70 60 50 40 30 20 10 OECD vs NonOECD Total products OECD vs NonOECD Motor Gasoline 16 14 12 10 8 6 4 2 0 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 OECD 0 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 NonOECD Non-OECD accounts for all of the forecast demand growth, averaging +1.4 mb/d 2016-22 OECD severely lags, pulled down by sharp declines in road transport
2010 2011 2012 2013 2014 2015 2016 2017 USD (2015) billion Global upstream investments to see modest rebound Global oil and gas upstream capital spending 2010-2017 900 800-25% 700 600 500 400 300 200 100 0-26% After falling by 25% in 2015 and 26% in 2016, to USD 433 billion, global upstream investments look on track to post gains in the range of 3-7% in 2017
Global oil supply rebounds then slows markedly Global oil supply capacity growth 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0 2014 2015 2016 2017 2018 2019 2020 2021 2022 Non-OPEC OPEC Following record slide in global upstream spending over 2015/16, only modest recovery seen in 2017 Unless significant new projects sanctioned quickly, growth all but stalls by 2020.
Low-cost Middle East drives solid OPEC capacity growth 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0-0.1-0.2 Iraq Iran UAE Libya OPEC crude capacity change 2016-2022 Saudi Kuwait Ecuador Qatar Gabon Angola Nigeria Algeria Venezuela OPEC builds 1.95 mb/d of new capacity by 2022 in anticipation of higher demand. Iraq leads gains, capacity shrinks in Africa and Latin America.
Iraq leads OPEC growth 5.4 5.0 4.6 4.2 3.8 3.4 3.0 2.6 2.2 2010 2012 2014 2016 2018 2020 2022 Actual Production Capacity OPEC builds 1.95 mb/d of new capacity by 2022 in anticipation of higher demand. Iraq leads gains, capacity shrinks in Africa and Latin America.
kb/d Non-OPEC production returns to growth 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0-200 - 400 After dropping by 0.8 mb/d in 2016, non-opec oil output is set to return to growth in 2017. By 2022, non-opec liquids production is seen 3.3 mb/d higher led by higher output in the Americas
US LTO production rebounds but highly price sensitive 8.0 US LTO production 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2010 2012 2014 2016 2018 2020 2022 $80/bbl Base case $50/bbl LTO set to expand by 1.4 mb/d by 2022 in our base case. At $80/bbl, output could expand by 3.0 mb/d over the same period
Middle East, China and India drive refining growth 2.0 1.5 1.0 0.5 0.0-0.5-1.0 Global refinery capacity additions 2016 2017 2018 2019 2020 2021 2022 North America Latin America Europe FSU Africa India China Asia Middle East World total After a rare fall in global refining capacity in 2016, global capacity sets out for a 7 mb/d addition, dominated by Middle East, China and Africa
Major shift of crude oil flows to Asia By 2022 there will be no net crude oil exporting country in Asia. 3 mb/d growth in refinery runs results in 3.6mb/d net import growth.
Crude flows West to East in even bigger volumes 8 East of Suez crude oil balance 6 4 2 0-2 - 4 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 With massive growth in Asian market, East of Suez crude deficit widens as Middle East exports are not sufficient to meet demand. Exports growth from Brazil and Canada each is higher than from the Middle East.
mb mb Oil storage capacity to grow in Asia, North America 450 400 350 300 250 200 150 100 50 0 Planned storage capacity growth by region Construction Expansion Planned Asia Oceania North America Europe Middle East Other 80 70 60 50 40 30 20 10 0 Top 5 countries building new storage capacity China US Korea Malaysia Indonesia Construction Expansion Planned Global storage capacity to grow by 226 mb over the next few years Only 40% of capacity growth to occur in the OECD. Non-OECD Asia and North America in the lead
World oil market grows tighter from 2020 40 Call on OPEC crude and stock change 38 36 34 32 30 28 2014 2015 2016 2017 2018 2019 2020 2021 2022 Call on OPEC + stock change OPEC Crude Capacity Call on OPEC rises and spare capacity shrinks without further upstream investment. Less than 2% in 2022 versus 3.7% in 2008 when prices rose sharply.
Conclusions Demand continues to grow steadily -- up 7.3 mb/d by 2022 -- driven by China and India, which will account for almost half of growth over the period Global production capacity will also grow -- up 5.6 mb/d -- led by the United States, Brazil and Canada Asian demand growth draws extra Middle East oil but also needs supply from other areas. Trade routes will shift and lengthen. Global investment remains weak in 2017 after two-year record plunge and OPEC spare capacity contracts to less than 2% in 2022 -- a 14-year low Risk of greater volatility & security of supply concerns: could lead to higher prices by 2020