Growth will exceed supply in 2010

Global Oil Demand

As the world ponders the thought of reaching peak oil and in the wake of a recession that hit the commodities market hard, many were hoping that 2010 would be a more straight forward year for the oil and gas industry.

But a poll taken by Reuters of the ten top oil-tracking analysts and organizations shows that oil demand is predicted to rise by 1.3 million barrels per day (bpd) next year to 85.9 million bpd. Meanwhile the rise in production from outside the Organization of the Petroleum Exporting Countries and output of natural gas liquids (NGLs) from OPEC members is seen growing by just 800,000 bpd in total.

Now questions remain over future commodities prices due to the uncertain nature of supply versus demand. As Barclays Capital analyst Costanzo Jacazioputs it, "The key question for prices is supply."

Crude oil inventories could fall by almost 150 million barrels next year

"2010 is really a bridging year - if the economies continue to perform as well as they have been doing during the early stages of the recovery, then I think by 2011 we'll be seeing the demand numbers at or above where they were in 2008," he added.

Alarmingly, if OPEC members can maintain current adherence levels to present output quotas, with group output including Iraq assessed around 28.9 million bpd, crude oil inventories could fall by almost 150 million barrels next year.

The demand for OPEC's oil is now at 29.3 million bpd.

Analysts have struggled to grasp what the future holds for the market after doubts surrounding the eventual strength of the economic recovery and how oil demand will respond following the impact of record prices, a global recession and increased environmental initiatives.

Goldman Sachs and Bofa-Merrill Lynch predict 2010 demand to be 86.4 million bpd and 86.7 million bpd respectively. While Barclays capital 1 million barrels below this because of increased conservation efforts.

The strongest growth to be in countries outside the OECD

Deutsche Bank sees demand as relatively weak in 2010, at just 86 million bpd, despite forecasting the world economy will grow at 3.7 percent in 2010.

In regards to demand growth the report forecasts the strongest growth to be in countries outside the OECD, with China leading the way.

"We see a healthy demand recovery of 1.5 million barrels next year, there's only so much you can contract," said Sarah Emerson, director of Energy Security Analysis Inc. in Boston.

"(Demand) growth in China next year should be significant and the US will go from two years of contraction to growth."

According to Reuters, the United States has posted a small recovery in demand. But many analysts remain doubtful about the strength of growth with some arguing oil use may never return to the highs of earlier this decade in North America and Europe.

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