OPEC, the Organization of Petroleum Exporting Countries, has released this year’s World Oil Outlook Report, which showed an increase in projections for oil demand. The 2.2 million barrels a day increase will be reached by 2022, said the report.
The 102.3 million barrels a day expectation for 2022 is a little less than 7 million barrels a day demand seen in 2016, and OPEC expects that demand growth will slow down after 2022, eventually reaching 111.1 barrels a day by 2040.
But any projected increase at this point contradicts global energy policies shifting towards cleaner fuels, lower emission levels, autonomous driving technology and, more importantly, burgeoning EV sales around the globe.
Transportation is one of the biggest clients for the oil industry, consuming about 44% of the oil produced around the world, and a massive shift towards electrification of vehicles should hit demand. And nearly every automaker around the world has some form of plan to electrify their product lines over the next several years.
But OPEC obviously thinks demand will keep rising. In one sense, their assessment is valid because much of the recent price action in oil has to do with U.S. shale oil producers increasing production to keep oil prices in check. The rise in U.S. shale production forced OPEC to keep its own output stable, but cartel experts expect the trend to reverse over time on the back of increasing demand from developing nations.
OPEC expects U.S. production to increase by 3.8 million barrels a day through 2022, which would meet two-thirds of the demand for that duration. Oil prices on Monday, meanwhile, hit their highest levels since July 2015, trading at above $62 a barrel.
According to OPEC’s Secretary-General Mohammed Barkindo in a foreword to the OPEC oil outlook report:
“It is evident that this major commitment to production adjustments has been central to the rebalancing process that the market has undergone this year”. – Reuters