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The outlook for the oil market in 2016
The global GDP growth forecast for 2015 has been revised down to 3.2% from 3.3%. This, however,
assumes a relatively higher growth rate in the second half, particularly after a weak first quarter. In 2016,
GDP growth is forecast to be higher at 3.5% (
Graph 1
). The OECD is forecast to expand by 2.1%, an
increase from this year’s 2.0%. China is expected to slow to 6.5% from 6.9% in the current year, while India
is forecast to reach higher growth at 7.7%, compared to 7.5% in 2015. Both Russia and Brazil are forecast to
move out of recession. While current oil prices will continue to support the world economy to some extent,
numerous challenges are likely to offset this positive effect, preventing higher growth. Among these issues
are the high debt levels across the OECD, still high unemployment in the Euro-zone in combination with the
uncertainties in Greece, expectations of rising interest rates in the US, overcapacity amid a slowing economy
in China, and on-going geopolitical issues.
Graph 1: GDP growth rate in 2016, %
Graph 2: Growth in oil demand and non-OPEC
supply in 2016, mb/d
The improvement in global economic activities in 2016 is projected to translate into higher oil consumption. As
a result, 1.34 mb/d of oil demand growth is forecast for next year with total oil consumption reaching
93.94 mb/d. OECD oil demand is expected to increase by 0.18 mb/d, with growth in the OECD Americas seen
rising firmly, while OECD Europe and Asia Pacific are expected to decline (
Graph 2)
. In the non-OECD, oil
demand growth is expected to be around 1.16 mb/d. The highest contribution is seen coming from China,
although growth is forecast to be lower than in the current year. Looking at the oil product mix, diesel oil and
gasoline will continue to drive growth to supply the expanding transportation sector. At the same time, the
demand forecast for next year is subject to some uncertainty factors, including the scope of economic growth,
industrial production developments, oil price trends, weather conditions, and changing oil intensity in different
regions, as well as policy changes, including fuel substitution.
Non-OPEC supply growth in 2015 has slowed compared to last year, although expectations have been
revised up since the beginning of July to average 0.86 mb/d. For 2016, non-OPEC supply growth is projected
to slow further, increasing by 0.30 mb/d to average 57.7 mb/d. This prediction is based on a bottom-up
approach, looking at field-by-field developments and the latest information regarding project ramp-ups and
startups. Total US liquids production is expected to grow by 0.33 mb/d, just one third of the growth of
0.93 mb/d expected this year. The main contributors to the growth are seen to be the US, Brazil, Canada,
Australia, Norway and China, which will be partially offset by declines in Russia, Mexico, Azerbaijan,
Kazakhstan, and Yemen. OPEC NGLs and non-conventional liquids are expected to grow by 0.17 mb/d to
average 6.18 mb/d in 2016.
Based on the above forecasts, incremental world oil demand will outpace projected non-OPEC supply and
OPEC NGLs, resulting in demand for OPEC crude in 2016 of 30.1 mb/d. This represents a projected increase
of 0.9 mb/d over the current year and follows an expected rise of 0.2 mb in 2015. This would imply an
improvement towards a more balanced market. Better-than-expected momentum in the global economy,
especially in the emerging markets, would contribute further to oil demand growth in the coming year.
2.8
0.9
0.8
7.7
6.5
2.1
1.2
1.5
2.6
3.5
1.8
-2.8
-1.0
7.5
6.9
2.0
1.2
1.3
2.4
3.2
-4 -2 0 2 4 6 8 10
OPEC
Russia
Brazil
India
China
OECD
Japan
Euro-zone
US
World
2015
2016
Source: OPEC Secretariat.
-0.5
0.0
0.5
1.0
1.5
FSU
Asia Pacific
Europe
Other Europe
Africa
Middle East
Latin America
Other Asia
China
Americas
Non-OECD
OECD
Supply
Oil demand
Source: OPEC Secretariat.
OPEC Monthly Oil Market Report – July 2015
3