The entry into effect of tighter emission rules for bunkering fuel will cause a temporary spike in crude oil demand as refineries increase their daily runs by around 400,000 bpd, OPEC said in its latest World Oil Outlook. This will reverse a global demand growth decline seen this year and in 2019, the cartel said.
This year, demand growth is estimated at 1.6 million bpd, which will slow down to 1.4 million bpd in 2019 but then rebound to 1.7 million bpd in 2020 after the introduction of the new rules that will cap the sulfur content of bunker fuel at 0.5 percent from the current 3.5 percent. This will dampen demand for high-sulfur fuels, but it will increase demand for middle distillates and low-sulfur diesel and fuel oil.
The effect of this change on global oil demand, however, will be temporary. Over the longer term, until 2040, oil demand will add 14.5 million bpd to 111.7 million bpd and the only contributors to this trend will be emerging economies. Demand in OECD members will decline by 8.7 percent in the period 2017-2040, while demand in Eurasia will inch up by just 1 percent. In emerging economies, however, demand is seen to expand by 22.2 percent thanks to stronger economic growth and the expansion of the middle class.
On the supply side, OPEC expects non-cartel producers to boost supply to a peak of 66.7 million bpd in 2025 as U.S. shale oil production peaks, too. After this, a decline will begin, with non-OPEC supply in 2040 at 62.6 million bpd, compared with an estimated 59.6 million bpd this year.
OPEC supply, on the other hand, will continue to grow steadily. This year, it is estimated at 38.8 million bpd, which is set to rise to 49.3 million bpd in 2040. There will be a slight dip in demand when U.S. shale oil reaches its peak, but afterwards, as non-OPEC supply begins to decline, demand for the cartel’s oil will rebound.
By Irina Slav for Oilprice.com
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