Global oil demand is expected to rise 1% this year, despite high prices and pessimism over the world economy, analysts with the National Bank of Kuwait said Friday in a new report.
The bank said it expects oil demand to be resilient and said growth would be driven by a projected 2.9% increase in consumption this year by non-OECD countries. OECD demand in 2012 is expected to decline by 0.9%, the analysts said.
In addition, the report said that based on recent trends, non-OECD demand could exceed that of OECD nations as early as 2013. Middle East supply, the report said, would be expected to provide 20% of the non-OECD crude supply.
The report also cautioned that a "summer rise in Saudi crude burn could lower exports and bite into thin global spare capacity."
Further, the analysts said global oil supply should increase by about 2 million b/d or more in 2012, about double the increase seen last year, in part because of the fact that Libyan output (up a projected 800,000 b/d year-on-year) had returned to the market sooner than had been expected.
The bank said Gulf Cooperation Council countries' and Iraqi output (up a projected 600,000 b/d year-on-year) also remain high, with an expected further boost from OPEC NGL production, which is expected to rise by 500,000 b/d from 2011.
The report predicted that natural declines in output from non-OPEC countries, production losses for other reasons, including attacks on facilities, and talk of an International Energy Agency oil release, could combine to "generate the first significant increase in global stocks" in six years.
But the bank also cautioned that two additional factors could potentially play into the 2012 supply picture -- the fact that overall stock levels remain low, especially given lack of existing spare production capacity, and uncertainty over the potential loss of Iranian exports as a result of the EU embargo beginning July.
NBK analysts predicted that oil prices would likely remain elevated though 2012, saying prices have climbed so far this year on a combination of tight fundamentals and concerns over tensions between Iran and the international community.
Brent averaged $119/b during the first quarter of 2012, up 13% from the same period of 2011.
But the "futures markets expect prices to ease back over the medium-term, in contrast to other forecasters," NBK said, adding that "geopolitical tension may have focused futures market buying on front-end," while analysts are focusing more on fundamentals and a possible medium-term supply crunch.
