How much oil will the world consume in 2011? What role will OPEC play in global oil production? Will biofuels become an important part of the oil market? The International Energy Agency’s (IEA) MEDIUM-TERM Oil Market Report tackles these questions, adopting a perspective that goes beyond the traditional shortterm market analysis provided in the IEA’s monthly Oil Market Report.

Drawing on current futures curves and the investment threshold for upstream projects, the MEDIUM-TERM Oil Market Report analyses how global demand and supply balances may develop in the next fi ve years. The forecasts look in detail at product demand and the supply potential from all the fi rmly planned individual upstream and downstream projects around the world. The results provide invaluable insights on vital issues such as surplus production capacity and product supply.

Policymakers, market analysts, energy experts and anyone interested in understanding and following trends in the oil market should fi nd this report extremely useful. The MEDIUM-TERM Oil Market Report is a further element in the IEA’s strong commitment to improving and expanding the quality, timeliness and accuracy of energy data and analysis.

EXECUTIVE SUMMARY
Overview

Seven years of rising prices are clearly having an effect on the oil market: upstream supplies are improving and substantive investment is helping to stem some oilfield decline while expanding the project base. Non-OPEC supplies will grow by an average 1.1 mb/d (2.0%) per year to lift supply to 56.7 mb/d in 2011 from 51.3 mb/d in 2006, including biofuels, with further gains coming from OPEC gas liquids and condensates. OPEC crude capacity is expected to rise by 3.3 mb/d over the same period to 36.3 mb/d.

There is little doubt that high prices are tempering global demand, which is forecast to come in below global supply capacity growth through to 2010. But beyond 2007, supply and demand growth trends are moving in opposite directions. By 2011 current price and income effects will have faded; non-OECD growth will be accelerating and global growth will marginally exceed supply-side expansions. World demand is projected to grow by 2.0% pa (1.8 mb/d) to reach 93.7 mb/d by 2011, fractionally above the 1.8% annual average seen over the past 10 years.

Download The MEDIUM-TERM Oil Market Report

PDF format, 1.15MB, 74Pages. Provided by The International Energy Agency (www.iea.org)

FOREWORD

To understand the dynamics and trends in the oil market, accurate, timely and comprehensive information is invaluable. The International Energy Agency (IEA) strives to improve, expand and provide the best data and analysis available. With this objective in mind, we are delighted to introduce the Medium-Term Oil Market Report, a new annual publication with interim updates that will look further into the future, beyond the Oil Market Report. We believe this additional focus will help to fill the gap that exists between our shorter-term analysis and the longer-term projections that appear in the World Energy Outlook and other IEA work.

The Medium-Term Oil Market Report provides a global overview of demand and supply trends through to 2011 based on the pressures that would develop under existing market forces and plans. We consider it a guide to the future assuming current trends persist. Any unforeseen shifts in the global economy, geopolitics, or other factors could of course produce different results.

One notable finding which emerges from our analysis shows that, based on investment committed to viable upstream projects during this period, effective surplus capacity should increase from recent razor-thin levels to a more comfortable level of 4-6 mb/d in 2011. Much of this increase comes from recently announced OPEC investments to expand crude and natural gas liquids. Preliminary analysis also suggests that product supplies should increase, reflecting increased refinery capacity and growth in biofuels. We welcome this result as good news since low spare capacity both upstream and downstream has contributed to tightness in the market.

We believe this projected build in spare capacity to be a positive development that should bring greater stability to the oil market. However, even by the tail-end of this forecast it is apparent that non-OPEC supply growth is well below the level of demand growth. With oil consumption projected to continue to increase to 2015 and beyond, continued investment will be critically needed to ensure reliable oil supplies.

Furthermore, consumer governments should maintain efforts to improve energy efficiency since demand, left unchecked, will continue to grow at a rapid pace. The impact of such policies on global oil markets is assessed in the Alternative Scenario of the forthcoming World Energy Outlook 2006.

One important element that is not addressed in this medium-term report is crude quality, an issue that we have highlighted elsewhere as having significant implications for the availability and affordability of oil products. To give the topic the attention it requires, we will prepare further analysis that will be released as a supplement to the September Oil Market Report.

Claude Mandil
Executive Director

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