Risks to oil output remain extraordinarily high: IEA

An Iraqi worker operates valves at the Rumaila oil refinery near the city of Basra, Iraq. AP file

Global oil demand growth will accelerate next year as the world economy expands and will again be met by rising supplies from the United States and Canada, further eroding Opec’s market share, the West’s energy watchdog said on Friday.

But the International Energy Agency (IEA) said in its monthly report that risks to oil production in several regions remained acute.

“Supply risks in the Middle East and North Africa, not least in Iraq and Libya, remain extraordinarily high,” the IEA said. “Oil prices remain historically high and there is no sign of a turning of the tide just yet.”

“Whether in crude or product markets, there is little room for complacency,” it added.

North Sea Brent crude oil hit a nine-month high above $115 a barrel in June as an insurgency swept across northwestern Iraq, taking control of large parts of the oil producing country and shutting down its largest refinery.

The oil market has weakened over the last month but remains nervous about further supply shocks. Brent was trading at around $108.20 a barrel by 0730GMT on Friday.

Making its first forecasts for 2015 in a monthly report, the IEA which advises major consuming nations on energy policy, said it expected global oil demand to grow by 1.4 million barrels per day (bpd) next year, up from 1.2 million this year.

“Newly industrialised and emerging market economies are once again forecast to lead the gains,” it said.

The world’s second largest oil consumer, China, will see oil demand growing by 4.2 per cent, up from 3.3 per cent this year, while the largest oil user, the United States, will only see gains of 0.2 per cent to 19.1 million barrels per day, up from a growth of 0.6 per cent this year.

The IEA said it expected non-Opec supply growth to average 1.2 million bpd next year, in line with increases in 2013 and 2014.

“The US and Canada remain the mainstays for growth, but sources are expected to be more diverse than in 2014,” said the IEA, naming Brazil, Britain, Vietnam, Malaysia, Norway and Columbia among countries which will grow output in 2015.

North America will remain the leader in 2015, contributing about two-thirds of the net non-Opec supply increase compared to 85 per cent in 2014.

US light tight oil, mostly from North Dakota and Texas, as well as Canadian bitumen, represent well over half of 2014 non-Opec supply growth, the IEA said.

It added that the Eagle Ford Shale Play in south Texas will remain one of the most dynamic oil provinces with output growing by 34 per cent to 1.4 million bpd this year and exceeding 1.6 million next year. The US shale oil boom has eroded the market share of the Opec and the trend will likely continue next year, it said.

The IEA forecast demand for Opec crude would edge down in 2015 to 29.8 million bpd, from 29.9 million this year. That is slightly below the level pumped by the group in June at just over 30 million bpd.

Insurgency in Iraq remains among the main threats to Opec’s production targets with output down by 260,000 bpd in June alone to 3.17 million bpd after an assault by militants forced the closure of the Iraq’s biggest refinery at Baiji and cut production from the giant Kirkuk field. It added that exports from Iraq’s giant southern fields were down in June mostly due to logistical snags and maintenance works at the Gulf Basra terminal.

Iran also saw a steep decline in exports in June to 1.08 million bpd after running at an average of 1.42 million bpd in January-May partially because of lower Chinese purchases to fill its strategic reserve.