The average price of Indonesian Crude Price (ICP) has increased to US$63.26 a barrel from $59.82 per barrel in the previous month, said the energy and mineral resources ministry - Photo: Special

JAKARTA (TheInsiderStories) – The American Petroleum Institute reportedly an increase in crude oil stockpiles of 10.5 million barrels. This will be the biggest jump since February 2017, if government data by Energy Information Administration (EIA) confirmed the data today.

The market immediately responded the data and make the crude oil price slid below the level of US$53 per barrel. The report dimmed market optimism after signs that the trade war between the United States (US) and China might be nearly over.

This morning, price of West Texas Intermediate (WTI) crude for November 2019 contract fell 1.07 percent to $52.79 per barrel. Inline with WTI, Brent oil for the December 2019 contract also fell 0.86 percent to $58.91 a barrel, after closing 1.16 percent at US $ 59.42 on Wednesday.

Based on EIA’ latest forecasting, annual crude oil production in the US will increase incrementally to 1.9 million barrels oil per day (bpd) this year and 2.0 million bpd in 2020, setting further new records. However, with onshore production booming, the offshore sector will account for only 15 percent of the US total over the next two years – down from about 23 percent eight years ago.

While, US offshore producers expect eight new projects to come online in 2019, and four more are slated for 2020, according to Rystad Energy. EIA expects these projects to contribute about 45,000 bpd in 2019 and about 190,000 bpd in 2020 as they ramp up production.

Except for Shell’ Appomattox project, which came online in May, every one of these new developments is a subsea tieback to an existing production platform – a low-cost method of developing new fields with minimal infrastructure investment.

On Oct. 11, the Organization Petroleum Exporting Countries(OPEC) forecast world oil demand to grow by 980,000 barrels a day (bpd) in 2019, or down from its September estimate at 984,000 bpd, the organization said in a monthly report released on Thursday (10/10). However, OPEC left its outlook for 2020 demand growth unchanged at 1.08 million bpd.

OPEC sees total world oil demand averaging 99.8 million barrels a day in 2018 and 100.88 million bpd in 2020. The organization also revised down its forecast for non-OPEC oil supply growth by 160,000 b to 1.82 million bpd, mainly reflecting downward revisions for the United States, Norway and United Kingdom.

For 2020, non-OPEC oil supply growth was revised down by 5,000 barrels a day to 2.2 million barrels a day year-over-year due to downward revisions for Kazakhstan and Russia.

In the previous report, OPEC predicted the demand for world oil until 2023 will decline even though energy demand is getting higher amid the global economic expansion. The fall in demand for OPEC crude is caused by strong oil supplies from non-OPEC countries, especially oil supplies from the US.

OPEC Secretary General Mohammad Sanusi Barkindo, said in written statement, that the past year had been a historic one for the organization, as well as the global oil industry, bringing more optimism to the industry, which in turn has had a positive effect in the global economy and trade worldwide.

He adds, US is still the largest source of supply in the medium to long term. The Donald Trump’ country contribute to two-thirds of additional supplies driven by soaring oil production levels. As well known, the US has pushed its oil production to a record level of 11 million bpd in recent years, as new technology revolutionizes shale oil production and opens up reserves that were previously considered uneconomical.

In addition, the US also imposed sanctions on OPEC members, Venezuela and Iran, which pushed Brent oil prices closer to the highest level since 2014 at around US$80 per barrel, and spurred US producers to increase production.

OPEC has revised the prospect of growth in crude oil and non-OPEC production in 2023 to 4 million bpd higher than last year’s report. It said non-OPEC would produce 66.1 million bpd of crude oil and liquid fuel by 2023, up from 57.5 million bpd in 2017.

Meanwhile, the US is projected to increase oil production to 13.4 million bpd by 2023, from 7.4 million bpd in 2017 so that total US output reaches 20 million bpd, OPEC added. This will make the US, after becoming the largest crude oil importer, will also be able to meet its own oil needs.

As a result of these changes, OPEC crude demand is predicted to decline to 31.6 million bpd by 2023, from 32.6 million bpd in 2017. In its 2017 report, OPEC expects crude oil demand to be around 33 million bpd in the mid-2020s.

Nevertheless, the organization still believes global oil demand will begin to recover and continue to rise to reach 40 mb/d in the next 2040. Moreover, OPEC sees global oil consumption until 2020 will reach 101.9 million bpd, up 1.2 million bpd from estimates in last year’ report.

Meanwhile, global oil demand in the longer term is expected to increase by 14.5 million bpd to reach 111.7 million bpd in 2040, slightly higher than last year’s forecast. In the long run, OPEC still hopes to maintain a balance between global market share and oil supply, especially in conditions of abundant and cheap reserves to be extracted.

It said, demand growth is driven by non-OECD regions, which see a huge increase of around 23 million bpd to 2040. Its added, there is no expectation for peak oil demand over the forecast period to 2040.

Furthermore, OPEC said, long-term demand growth comes mainly from the petrochemicals (4.5 million bpd), road transportation (4.1 million bpd) and aviation (2.7 million bpd) sectors. The total vehicle fleet – including passenger and commercial vehicles – is projected to increase to around 2.4 billion in 2040.

It said, the majority of the growth continues to be for conventional vehicles, but the long-term share of electric vehicles in the total fleet is projected to expand and reach a level of around 13 percent in 2040, supported by falling battery costs and policy support.

Non-OPEC liquids supply is forecast to increase by more than 9 million bpd between 2017 and 2027, with the major driver being US tight oil, but beyond this period non-OPEC supply is set to decline by around 4 million bpd.

The demand for OPEC crude is projected to increase to around 40 million bpd in 2040, up from 32 million bpd in 2018. While, the share of OPEC crude in the global oil supply is estimated to increase from 34 percent in 2017 to 36 percent in 2040.

“In OPEC’ most recent World Oil Outlook, we see global energy demand increasing by around 33 percent by 2040,” said secretary general of OPEC Mohammad Sanusi Barkindo in one seminar in London, United Kingdom, yesterday.

The calculation, he said, based on United Nation projected the global economy in 2040 is expected to be double the size it was in 2018. And world population is projected to reach around 9.2 billion, an increase of around 1.5 billion from today’ level.

In the period to 2040, he continued, fuel efficiency improvements are expected to result in a far greater reduction in oil demand, than the increasing penetration of alternative fuel vehicles. From OPEC’ perspective, said Barkindo, the foundation for investment, growth and economic diversification can only come through balance and stability in the market.

OPEC said, global refinery additions are projected mainly in developing regions, led by the Asia-Pacific and the Middle East, but also Africa and Latin America. Fast evolving trade patterns for crude oil and refined products will continue to evolve, driven initially by additional flows from the US & Canada, and in the long-term by the Middle East, mostly attributed to increasing imports to the Asia-Pacific.

Talking about investment, OPEC sees, in the period to 2040, the required global oil sector investment is estimated at $11 trillion.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com