The oil market in 2012 has been strongly impacted by the great uncertainty in the global economy, particularly from the OECD countries, resulting in frequent revisions in world economic growth and consequently global oil demand. These factors are likely to continue into next year, making forecasting oil market developments very challenging. The world economy is continuing its subdued recovery and prospects remain fragile. In the OECD, the real economy still lacks momentum, while growth levels in the emerging economies remain largely dependent on exports. In the coming year, the world economy is likely to face continuing challenges from Europe’s sovereign debt burden and its weak banking system. The deceleration in the emerging economies and the recent easing in the US recovery, due to persistently high unemployment, are also expected to dampen growth to some degree.
This has led to a world economic growth forecast of 3.2% in 2013, slightly lower than the estimate of 3.3% for the current year. OECD is forecast to continue to see slow growth in 2013 at 1.4%, the same level as in 2012. This represents only 0.7 percentage points (pp) of the global economic growth forecast. In contrast, the non-OECD economies will provide the majority of growth at 2.5 pp, with China forecast at 8.0% and India at 6.6%. However, the dependency of emerging economies on exports to the OECD countries, combined with potentially inflated core asset markets – such in housing – and a still relatively low domestic consumption base represent downward risks to the forecast for GDP growth. Further stimulus by BRIC economies may be limited in size and impact, despite existing flexibility in their financial resources. The economic situation in the MENA region is also expected to decelerate. While economic growth this year is expected at 3.5%, in the coming year, growth in the MENA region is forecast to ease to 3.0%. World oil demand is forecast to continue growing by 0.8 mb/d in 2013 to average 89.5 mb/d, representing a decline of 0.1 mb/d from the growth estimate for the current year.
The slowdown is expected not only in the OECD – which is projected to see a further contraction of 0.2 mb/d – but also in the non-OECD, where growth is forecast at around 1.0 mb/d. As in 2012, industrial and petrochemical consumption are expected to be the main drivers of oil demand next year. In terms of products, diesel and naphtha are foreseen showing the most growth in 2013. The bulk of gasoline demand is expected to come from growing transportation consumption in non-OECD countries, with some contribution from the OECD regions of North America and the Pacific. US gasoline demand is expected to see a slight improvement next year; however, the forecast could be negatively affected by the pace of the country’s economic recovery. Non-OPEC supply is forecast to increase by 0.9 mb/d in 2013 to average 54.0 mb/d. This compares to estimated growth of 0.7 mb/d this year. On a regional basis, North American supply is expected to experience the highest growth – supported by an expected healthy addition of tight oil from shale development in the US and Canada – followed b Latin America and FSU. OECD Europe is projected to see the only decline in 2013. The non OPEC supply forecast for 2013 incorporates considerable risks on factors such as natural decline rates across various regions and progress in new supply developments, as well as due to environmental issues, production costs and oil price levels. Moreover, continued geopolitical concerns and security challenges remain major risk factors for some producing countries in 2013. OPEC NGLs and non-conventional oils are expected to increase by 0.2 mb/d to average 5.9 mb/d for the year.
Based on the above forecasts, the projected growth in oil demand in 2013 will largely be met by incremental non- OPEC supply, indicating a comfortable market situation next year. As a result, the demand for OPEC crude in 2013 is forecast to average 29.6 mb/d, representing a decline of around 0.3 mb/d from the previous year. The current high level of stocks in the OECD, combined with rising inventories in the non-OECD, should also provide an additional cushion to the market. At the same time, the considerable uncertainties impacting the forecast highlight the need for continued close monitoring of oil market developments in the coming months.