JEDDAH – Global oil demand is expected to rise by 0.8 - 0.9 million barrels per day (around 1 percent) in 2012, above last year's increment though below the historic average, the latest Kuwait Economic Brief, published by the National Bank of Kuwait (NBK), said. Demand in non-OECD countries is seen rising by around 1.2 mbpd (2.9 percent), while OECD demand is expected to fall by up to 0.4 mbpd (-1.0 percent), it said. The Centre for Global Energy Studies (CGES) takes a more conservative view, forecasting total demand growth of just 0.6 mbpd (0.7 percent), according to the report. It attributes this to impact of the eurozone crisis on growth in emerging markets. A modest pick-up in demand is seen in 2013, though the structure of that growth - falling OECD demand more than offset by growth in emerging markets - remains the same. Demand growth is set to stay below its pre-credit crunch trend. Crude output of the OPEC-11 (i.e. excluding Iraq) fell significantly by some 172,000 bpd in June to 28.4 mbpd, said the Kuwait Economic Brief. The bulk of this decline came from Iran where output fell by a sizeable 189,000 bpd to just below 3 mbpd, its lowest level in more than two decades. The figures for July - when the EU embargo on Iran came into effect - could reveal and even larger fall. Meanwhile, increases were witnessed in Nigeria (30,000 bpd), Libya (29,000 bpd) and Saudi Arabia (13,000 bpd), the report noted. Libyan output fell by almost 100,000 bpd in June due to infrastructure bottlenecks, and is expected to fall further the following month as pre-election protests in early July led to temporary disruptions at the country's key oil export terminals and a shut-in of around 0.3 mbpd of production, the report said. Total OPEC production (including Iraq) dropped to below 31.4 mbpd in June, a second consecutive month of near 100,000 bpd declines. After slipping in May, Iraqi oil production regained almost the entire decline, increasing by some 62,000 bpd in June to almost 3 mbpd. Significant increases in coming months will remain contingent on the dispute-related stoppage of Kurdish oil transfers to Baghdad, and perhaps the security situation in Syria. Non-OPEC supplies are projected to increase by around 0.7 mbpd in 2012, with Opec natural gas liquids (NGLs) contributing more than half of the increase. The majority of non-OPEC supply growth is likely to come from North America. In total, if OPEC-12 output remains at its current level, global oil supplies could rise by more than 2 mbpd in 2012. Next year growth will depend not just on OPEC policy, but on North America and on the resumption of flows from Sudan, Yemen and Syria. Oil market fundamentals are expected to loosen in 2012 overall on the back of rising supplies and moderate demand growth. However, much of that softening may now have occurred and - a crisis in the world economy notwithstanding - fundamentals could tighten again into 2013. Using the CGES's more conservative forecast of a 0.6 mbpd increase in demand in 2012, and assuming OPEC output increases on average by 1.6 mbpd (with a small cut in output in 4Q 2012), then supply exceeds demand this year resulting in a stock build of 1.0 mbpd. But since most of this took place in 1H 2012, the price of KEC remains supported at $90 to $100 per barrel in the second half of the year and begins to rise in mid-2013. If non-OPEC supplies turn out 0.3 mbpd weaker than expected this year, then a smaller stock-build of 0.7 mbpd is expected, the report added. The price of KEC should, in this case, remain at around $100 per barrel for the rest of 2012 and rise early next year. Alternatively, non-OPEC supplies could turn out 0.2 mbpd higher than expected this year, partially as a result of the restoration of output lost to outages in the first half of the year. In this scenario, the recent price rebound is reversed, and the price of KEC falls to below $80 per barrel early next year, the report said. – SG/Agencies
