Despite an expected increase in NGLs and nonconventional oil production, Organization of Petroleum Exporting Countries (OPEC) oil demand could fall in 2015 as other nations—led by the U.S.—step up to meet the world’s oil needs and the global economy rebounds.

The forecast came as part of the OPEC Monthly Oil Market Report released July 10.

“Even if next year’s world economic growth turns out to be better than expected and crude oil demand outperforms expectations, OPEC will have sufficient supply to provide the market,” OPEC said.

Non-OPEC supply could increase by 1.3 MMbbl/d to average 57 MMbbl/d in 2015. Production of OPEC NGLs and nonconventional liquids are predicted to grow by 200,000 bbl/d next year to average 6 MMbbl/d.

“In 2014, growth is expected to come mainly from Algeria, Iran, Nigeria, Saudi Arabia and the UAE,” OPEC said. “Regarding the 2015 forecast, it is predicted that incremental production will come mainly from Iran, Saudi Arabia, Libya and Algeria.”

World oil demand in 2015 could increase to 92.3 MMbbl/d, surpassing this year’s estimated year-end demand by 1.2 MMbbl/d, according to the report. But demand for OPEC crude is expected to fall by 0.3 MMbbl/d to average about 29.4 MMbbl/d.

Bucking a trend, demand from Organization for Economic Cooperation and Development member countries could increase for the first time since 2010. Predictions are that OECD oil demand will jump by 40,000 bbl/d, mainly due to higher production from North America, while non-OECD consumption is expected to provide the bulk of oil demand growth with 1.18 MMbbl/d, according to OPEC. Contributing the most to the growth are the U.S. and Canada, trailed by Latin America as production from Brazil ramps up.

Supply growth

The U.S. is on track to lead the production surge, with supply predicted to average 13.12 MMbbl/d next year, slightly higher than 2014.

“The outlook in 2015 is supported by anticipated onshore tight oil developments, aided by rising investment and more activities in the [Gulf of Mexico],” the report said. “In 2015, oil drilling activities will continue to improve, with a relatively steady number of rigs drilling a significantly higher number of wells as operational efficiency improves.”

OPEC predicts Canada’s oil supply could grow more than it has since 1973, reaching an average 4.53 MMbbl/d. Growth here is expected due to higher oil sands and tight oil production.

OPEC noted, however, that the forecast comes with a high level of risk.

“According to the report of six major IOCs, the upstream CAPEXs are increasing 10% [year-over-year], and the expectation of capital expenditures in 2014 and 2015 indicates a rising trend, nevertheless other risk factors such as geopolitics, environment, price and technical developments will continue to impact supply growth expectations.”

OPEC also specifically mentioned technical challenges such as “sharper-than-expected decline rates, particularly in tight oil plays, and unplanned shutdowns.”

Growth from Canada and the U.S. is expected to offset anticipated declines in Mexico, where state-run Pemex continues to battle declining production, especially from offshore fields in the GoM. OPEC predicts Mexico’s oil supply will drop by 50,000 bbl/d in 2015, despite the planned startup at Ayatsil, a deepwater development with a peak capacity of 150,000 bbl/d.

Other OECD areas where production increases are anticipated include:

  • Europe, up 0.2 MMbbl/d to average 3.57 MMbbl/d. Norway is poised to lead growth, having already made 13 new discoveries this year. Production in the U.K. could stabilize, helped by new projects which include the oil and condensate project of Greater Stella, OPEC said.
  • Latin America, up 0.21 MMbbl/d to average 5.13 MMbbl/d. Shale development in Argentina’s Vaca Muerta play with a projected increase in Brazil’s oil supply were listed by OPEC among the top supply providers.

Next year could bring record oil production in China, according to OPEC, which forecasts a supply increase of 50,000 bbl/d to average 4.32 MMbbl/d in 2015.

“This trend is expected to continue as companies expand their capacity, particularly in offshore developments as well as in several EOR projects,” OPEC said. “The production from the two biggest oil fields in China, Daqing and Changquig, will continue to increase production.”

Oil supply from other Asia-Pacific areas is expected to be stagnant on lower output from Indonesia, India and Malaysia, despite a slight increase from Australia.

OPEC expects Middle Eastern oil production to jump by 30,000 bbl/d to average 1.35 MMbbl/d, driven by increases from Yemen and Oman where EOR projects are boosting output from mature fields.

Supply declines

While the $10 billion Moho Nord subsea project offshore Congo will add to higher oil supplies from the country, up 10,000 bbl/d, it is not expected to be enough to reverse the overall decline in Africa’s oil supply, according to OPEC. The continent could see supply drop 30,000 bbl/d to average 2.44 MMbbl/d in 2015.

Declines are predicted for Chad, Egypt, Equatorial Guinea, Gabon, South Sudan and Sudan for a variety of reasons.

Former Soviet Union (FSU) oil supply is also expected to fall, dropping 60,000 bbl/d to average 13.37 MMbbl/d. OPEC believes Russia’s oil supply will be relatively unchanged next year at an average 10.56 MMbbl/d.

“Based on the pushback of the Kashagan production startup in Kazakhstan, a severe decline in Azerbaijan’s ACG project in the Caspian and undefined new projects in Russia, total FSU production is forecast to decline,” OPEC said in the report. “In terms of volume, the FSU remains the region with the second-highest supply after OECD Americas.”

Contact the author, Velda Addison, at vaddison@hartenergy.com.