World oil consumption will rise for the first time in two years in 2010 as a recovery in the global economy boosts demand, according to a Reuters poll of top oil-tracking analysts and organisations.
But the expected increase of 1.1 percent worldwide is unlikely to drain away all the excess supplies,

despite the slow growth in production outside the Organization of the Petroleum Exporting Countries.
Oil demand is predicted to rise by 900,000 barrels per day (bpd) to
84.9 million bpd in 2010, the poll of nine forecasters found. World
demand has fallen by 2.5 percent since hitting 86.2 million bpd in
2007, as the dual impact of high prices and the economic crisis cut
consumption.
The steep drop in demand saw oil prices crash from record highs of
almost $150 a barrel last summer, to below $40 a barrel at the turn of
the year.
Since then prices have risen back to around $70 a barrel after the OPEC
producer group tightened supplies. Prices have also found support from
investors betting demand could start to outpace supply growth in years
to come.
Some analysts said that view might be premature.
“Six months ago there were worries that in the future supplies could
tighten a lot, but I think those worries aren’t as big now,” said Adam
Sieminski, chief energy economist for Deutsche Bank. “In our view oil
demand won’t be particularly robust next year, and non-OPEC supply will
still be strong.” Non-OPEC supply was seen rising by an average of
100,000 bpd in 2010 to 50.5 million bpd, with the need for crude from
OPEC seen rising by an average of 400,000 bpd to 29.5 million bpd. That
is some 2 million bpd below the amount of crude oil the world needed
from OPEC members in 2008. OPEC member countries have tried to cut as
much as 4.2 million bpd of oil — roughly 5 percent of world demand –
from the market since September in a bid to soak up excess supplies.
The group’s spare production capacity was estimated to rise above 6.5
million bpd in 2010 if it holds output steady.
But OPEC’s output of natural gas liquids (NGLs), which are not subject
to the group’s official quota limits, will help boost global supplies,
rising by 12 percent to 5.6 million bpd in 2010.
CHINA
Almost a quarter of next year’s increased global thirst for oil, 200,000 bpd, is expected to come from China.
Forecasters saw China’s oil demand growing by between 1 and 4 percent,
from levels of 8 million bpd this year. The industrialized OECD nations
will burn 45.6 million barrels next year, the same amount as 2009.
The pace of any recovery in demand from the United States, which
consumes about a fourth of the world’s oil supply, is a key variable.
“The main drivers in oil demand growth in 2010 will be the China, Saudi
Arabia and the United States. These are the 3 key areas, with U.S.
demand expected to recover as the economy picks up,” Barclays Capital
analyst Amrita Sen said.
The pace of economic recovery, especially in the industrialised world,
is a wild card for oil demand and prices. Merrill Lynch, the most
bullish forecaster polled, saw the global economy growing by 3.7
percent next year. The average forecast was for economic growth of 2.8
percent. “How effective stimulus packages in the United States and
China have been will have a big impact,” Energy Security Analysis Inc.
director of oil markets Rick Mueller said.
“Obviously, the cost of oil is another issue, since high costs could hurt recovery.”
Prior to the economic crisis, many oil analysts estimated oil demand
growth as global GDP growth minus around 2 percent. But several
analysts polled said that relationship had broken down after last
year’s price spike and the economic downturn.
“While Barclays has one of the largest projections for global GDP
growth (3.6 percent), we have taken into account the fact that we’re
likely to see more energy efficiency,” said Sen. “As well as
substitution away from oil to cheaper natural gas, political
initiatives in Europe and North America should cut demand growth, so
our projection isn’t as large as some.”

Source: Reuters

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