The Organization of Petroleum Exporting Countries World Oil Outlook 8 th November, 2009 The International Energy Forum Riyadh, Saudi Arabia Hasan M Qabazard Director, Research Division OPEC Secretariat Organization of the Petroleum Exporting Countries
The world has confronted a major economic turmoil and extreme price volatility Spill-over of the financial crisis to the real economy has led to a severe global downturn Present world recession is the deepest and most synchronized contraction in the past sixty years Price escalation and high volatility was inconsistent with market fundamentals Financialization of oil and commodity markets led to significant speculation World real GDP growth (in %) Weekly average spot WTI prices, (US$/b) 8 150 143 6 5.1 120 3.8 4 2.9 2.7 1.2 2 2008-2009 90 1.0 0.6 0 79 -1.2 -2 60 2006-2007 -4 -3.6 World OECD DCs 32 30 -6 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov 05 06 07 08 09 10 Organization of the Petroleum Exporting Countries 2
Global oil demand erosion has been considerable (year-on-year change, mb/d) The collapse in oil demand is largely a consequence of the two-pronged economic crisis World oil demand has declined in two successive years for the first time since early ’ 80s Oil demand reduction may be partly irreversible: contraction in OECD is to reach 4.5 mb/d in 2010 8 6 (demand growth: mb/d) 4 3 (GDP growth: %) 0 0 OECD demand Non-OECD demand OECD GDP DCs GDP -4 -3 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Organization of the Petroleum Exporting Countries 3
Large overhang in oil stocks underlines weak fundamentals (mb) Besides ample supply, inventory overhang reflects still weak state of market fundamentals Total OECD commercial oil stocks end- September ‘ 09 are still 106 mb above 5-year average Forward demand cover in September estimated at around 59 days Around 130 mb crude oil (~55 mb) & products (~75 mb) are kept in floating storage OECD commercial oil stocks Estimated floating storage: (deviation from five years average) (absolute level) 210 150 130 Crude Crude Total Products Total products 55 140 100 106 25 70 50 75 81 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Jan Feb Mar Apr May Jun Jul Aug Sep Organization of the Petroleum Exporting Countries 4
Crude price fluctuations in tandem with financial markets Increasing use of oil as an asset class exposed the oil market to financial market volatility Crude prices have been closely following the movements in equity markets and US Dollar WTI price vs. US $ WTI price vs. equity market (weekly average) (weekly average) (US$/ € ) (US$/b) (S&P 500 Index) (US$/b) 150 1.65 150 1650 WTI WTI 120 1.55 120 1400 90 1.45 90 1150 US$/ € S&P 500 60 1.35 60 900 30 1.25 30 650 Jul Aug Sep Nov Dec Jan Mar Apr Jun Jul Aug Oct Jul Aug Sep Nov Dec Jan Mar Apr Jun Jul Aug Oct (2008-2009) (2008-2009) Organization of the Petroleum Exporting Countries 5
The world economy is showing signs of stabilization World economy now appears to be moving from a period of containing the crisis to one of recovery The 2Q is now seen to mark the bottom of the recession Economic recovery may be a lengthy one: deficits, debts, unemployment pose considerable risks Manufacturing index in the OECD area OECD quarterly GDP growth (September ’ 07 – ’ 09) (% annualized) 60 6 Euro zone Japan USA 50 0 40 30 -6 20 -12 10 USA Japan Euro-zone 0 -18 1Q07 4Q07 3Q08 2Q09f 1Q10f 4Q10f Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- 07 07 08 08 08 08 09 09 09 Organization of the Petroleum Exporting Countries 6
Medium-term prospects: greater uncertainties World oil demand growth is expected to rise gradually to 1.2 mb/d by 2013 (exposed to higher risks) Non-OPEC liquids negatively affected by lower prices (cancellations/delays) OPEC is investing $110-120 billion Medium-term requirements for OPEC crude oil by 2013 would not be higher than 2008 levels In the reference case spare OPEC crude oil capacity settles around 6 mb/d Oil demand & non-OPEC supply OPEC crude capacity and crude supply growth prospects (reference case) 2 40 10 Spare capacity (rs) Capacity (ls) Crude supply (ls) reference Oil demand growth 36 8 1 protracted recession reference 32 6 0 Non-OPEC supply growth protracted 28 4 -1 recession 24 2 -2 2008 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Organization of the Petroleum Exporting Countries 7
Energy and oil demand are set to grow (demand by fuel type, mtoe) Demand for energy will grow, albeit at a lower pace Fossil fuels satisfy more than 80% of global energy needs over the projection period Oil remains the leading source of energy – fast growth in natural gas Low base for renewable energy – continue to grow fast, but limited impact on energy mix Growth (% pa) Fuel shares (%) 2007-2030 2007 2010 2020 2030 Oil 0.8 36.4 35.1 33.1 30.9 Coal 1.5 28.2 28.5 28.8 28.1 Gas 1.9 22.3 22.6 23.2 24.1 Nuclear 1.6 6.6 6.7 6.5 6.7 Hydro 2.3 2.4 2.6 2.7 2.8 Biomass 3.4 3.5 3.9 4.6 5.4 Other renewables 7.4 0.5 0.6 1.1 1.9 Total 1.5 Organization of the Petroleum Exporting Countries 8
World oil demand outlook reference case (mb/d) Oil demand grows by 1%, or less then 1 mb/d per annum over the forecast period World oil demand increases by 20 mb/d from 2008 to 2030, but nearly 8 mb/d lower than WOO 2008 Structural shift: OECD demand declines Developing countries consumption accounts for over 95% of the net increase, mainly in Asian region Disparity in per capita oil use among regions will remain a critical issue Change Growth ('08-'30) p.a. 2008 2015 2020 2025 2030 '30 -'08 % mb/d OECD 47.5 45.5 45.0 44.3 43.4 -4.1 -0.4 -0.19 DCs 33.0 39.3 44.8 50.2 56.1 23.1 2.4 1.05 China 8.0 10.4 12.3 14.1 15.9 8.0 3.2 0.36 Other Asia 9.3 11.0 12.9 14.9 17.2 8.0 2.9 0.36 Transition economies 5.1 5.4 5.7 5.9 6.1 1.0 0.8 0.05 World 85.6 90.2 95.4 100.4 105.6 20.1 1.0 0.91 Organization of the Petroleum Exporting Countries 9
Transportation sector: main source of oil demand growth Nearly half of world oil consumption will stem from transportation by 2030 Passenger cars and commercial vehicles: saturation versus economic activity Greater potential for growth in the stock of vehicles in developing countries Passenger car ownership Average annual global growth per 1,000 of population, 2006 in oil demand by sector Organization of the Petroleum Exporting Countries 10
Conventional liquids’ resource base is sufficient Increasing resource base levels (improved technology, enhanced recovery) Technology blurs distinction between conventional and non-conventional oil Resource base likely to continue to grow … especially with non -conventional oil World’s conventional oil resources Incremental world oil supply 1980-2030 Date of assessment release Organization of the Petroleum Exporting Countries 11
World oil supply long-term outlook reference case (mb/d) Non-OPEC crude oil plus NGL supply: a steady plateau of 45 mb/d before beginning a gradual decline after 2020 Total non-OPEC supply continues to rise (large growth from Canadian oil sands and biofuels) Rapid increase in OPEC NGL Demand for OPEC crude rises to 41 mb/d by 2030, however it is 2.5 mb/d lower than WOO 2008 Change Growth ('08-'30) p.a. 2008 2015 2020 2025 2030 '30 -'08 % mb/d OECD 19.6 18.7 19.1 19.3 19.6 0.0 0.0 0.00 DCS, excl. OPEC 16.1 17.3 18.0 18.3 18.3 2.2 0.6 0.10 Russia 9.8 10.2 10.5 10.6 10.6 0.9 0.4 0.04 Caspian 2.9 4.0 4.4 4.7 5.1 2.2 2.6 0.10 Non-OPEC 50.3 52.4 54.3 55.4 56.3 6.0 0.5 0.27 non-conventional 3.1 5.0 6.8 8.6 10.7 7.6 5.8 0.34 OPEC 35.5 38.1 41.4 45.3 49.6 14.1 1.5 0.64 OPEC NGLs 4.3 5.8 6.7 7.4 8.0 3.7 2.8 0.17 OPEC crude 31.2 32.0 34.3 37.4 41.1 9.9 1.3 0.45 Organization of the Petroleum Exporting Countries 12
OPEC crude oil share will not be much different than today Over the long-term, increase in non-crude will moderate the need for higher crude supply The share of OPEC crude in total supply by 2030 remains below 40% OPEC’s crude share in world oil supply Incremental OPEC and non-OPEC supply Organization of the Petroleum Exporting Countries 13
Uncertainties pose investment risks for OPEC MCs Possible waste of precious resources Negative effects upon future investments Upstream development investment requirements by 2020 lie within $180 to $430 billion range Cumulative OPEC upstream investment requirements 48 mb/d → $ 430 billion 31 mb/d → $ 180 billion Organization of the Petroleum Exporting Countries 14
Security of demand is an integral part of energy security Oil demand projection figures have been repeatedly revised down The security and predictability of demand are as important as the security of supply Changing world oil demand projections for 2025 Organization of the Petroleum Exporting Countries 15
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