With global economic growth in 2014 projected to increase to 3.5 per cent from 2.9 per cent in 2013, world oil demand is forecast to rise by one million barrels/day over the same period, according to OPEC latest monthly bulletin.
''World oil demand is expected to grow by 100,000 b/d in 2014 over this year, supported by improved performances by the emerging economies and as the global economy continues to recover in general.
OPEC's Monthly Oil Market Report (MOMR) for December forecasts that world oil demand is projected to grow at the higher rate of 1.0 million barrels/day in 2014, compared with 900,000 b/d this year.
"Oil demand growth continues to come mainly from non-OECD countries, while OECD oil demand is expected to show a further contraction, albeit at a slower rate," it observed.
However, the MOMR's feature article pointed out that the latest forecast is associated with uncertainties related to the pace of economic growth in the OECD region, China and India, as well as to policy reforms in oil product retail prices in some emerging economies.
The improving picture is backed by a strengthening of the global economy in 2014, which is slated to expand by 3.5 per cent, mainly as a result of momentum in the OECD economies.
This compared with estimated global GDP growth of 2.9 per cent in 2013.
"However, many challenges remain, ranging from the outcome of postponed fiscal negotiations in the United States, the future monetary policy of major central banks, the resilience of the Euro-zone recovery, and continued reforms in the emerging economies to improve structural issues," commented the report.
It stressed that, having said that, the signs of a recovery are already visible in rising global industrial production.
The MOMR said that, on the oil supply side, non-OPEC supply growth in 2014 is expected at almost the same level as this year at 1.2m b/d with some risks in both directions, given possible early start-ups or delays, as well as political, technical and meteorological factors.
Output of OPEC NGLs is expected to rise by 100,000 b/d in 2014, following an increase of 200,000 b/d this year.
The report noted that non-OPEC supply growth in 2013 has performed better than initially expected, supported mainly by the US and Canada, which added around 1.0m b/d.
Other contributions to 2013 growth have come from the Sudans, Russia and China, while output disruptions in Syria, along with the decline in North Sea production, partially offset the growth.
"While the above forecasts indicate that incremental non-OPEC oil supply and OPEC NGL growth will outpace projected world oil demand growth, the 164th OPEC Ministerial Conference (held in Vienna on December 4) decided to maintain current production of 30.0m b/d in the interest of maintaining market equilibrium.
"In taking this decision, the Organization's Member Countries re-confirmed their readiness to promptly respond to unforeseen developments that could have an adverse impact on an orderly and balanced oil market." Looking at 2013, the MOMR said the price of the OPEC Reference Basket experienced significant quarterly swings. After reaching close to $115/b in the first quarter, the Basket price came down steeply to around $96/b in the second quarter, before regaining strength to rebound sharply in the third quarter." "Over this period, the increase in crude oil prices was driven by numerous outages, supply disruptions and improved macroeconomic indicators, while lower refinery appetite, production increases, high inventories and economic run cuts pressured prices," it observed.
"Geopolitical factors impacted prices in both directions. At the same time, speculative activities continued to magnify the upside and downside movements in crude oil prices," it added.
The report said that improved macroeconomic indicators have provided some optimism for OECD regions, especially OECD Europe. In contrast, weakening consumption and the slowing economic pace in some non-OECD countries have necessitated a number of downward revisions, largely offsetting gains.