OIL Medium-Term Market Report 2014 Market Analysis and Forecasts to 2019 Please note that this PDF is subject to specific restrictions that limit its use and distribution. The terms and conditions are available online at http://www.iea.org/ termsandconditionsuseandcopyright/ © OECD/IEA,2014 © OECD/IEA, 2014 © OECD/IEA, OIL Medium-Term Market Report 2014 Market Analysis and Forecasts to 2019 © OECD/IEA,2014 INTERNATIONAL ENERGY AGENCY The International Energy Agency (IEA), an autonomous agency, was established in November 1974. Its primary mandate was – and is – two-fold: to promote energy security amongst its member countries through collective response to physical disruptions in oil supply, and provide authoritative research and analysis on ways to ensure reliable, affordable and clean energy for its 29 member countries and beyond. The IEA carries out a comprehensive programme of energy co-operation among its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports. The Agency’s aims include the following objectives: n Secure member countries’ access to reliable and ample supplies of all forms of energy; in particular, through maintaining effective emergency response capabilities in case of oil supply disruptions. n Promote sustainable energy policies that spur economic growth and environmental protection in a global context – particularly in terms of reducing greenhouse-gas emissions that contribute to climate change. n Improve transparency of international markets through collection and analysis of energy data. n Support global collaboration on energy technology to secure future energy supplies and mitigate their environmental impact, including through improved energy efficiency and development and deployment of low-carbon technologies. n Find solutions to global energy challenges through engagement and dialogue with non-member countries, industry, international organisations and other stakeholders. IEA member countries: Australia Austria Belgium Canada Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Japan Secure Sustainable Together Korea (Republic of) Luxembourg Netherlands New Zealand Norway Poland Portugal Slovak Republic © OECD/IEA, 2014 Spain International Energy Agency Sweden 9 rue de la Fédération Switzerland 75739 Paris Cedex 15, France 2014 © OECD/IEA, Turkey www.iea.org United Kingdom Please note that this publication United States is subject to specific restrictions that limit its use and distribution. The European Commission The terms and conditions are available online at also participates in http://www.iea.org/termsandconditionsuseandcopyright/ the work of the IEA. FOREWORD FOREWORD This edition of the Medium-term Oil Market Report can best be seen as a guide to that uncharted territory, tomorrow’s oil market and industry. Each one of its sections unveils a world that is at once familiar and oddly different from today’s reality. The supply story has two sides: on the one hand, the non-conventional success story, arguably the most transformative oil-market development of the last five years, continues to unfold, but undergoes a change of its own as growth starts slowing in the United States but picks up elsewhere. By the end of the decade, other countries will likely be adding to supply in a significant way, and the non-conventional oil industry will have matured into a more global phenomenon. On the other hand, political risk in North Africa and the Middle East, far from receding, is only becoming a larger threat to oil investment and production, as the latest developments in Libya and Iraq show only too well. Within OPEC, Iraq remains the main source of most of the expected capacity growth, but this expansion looks increasingly at risk. On the demand front, the potent mix of sustained high prices, growing inter-fuel competition and environmental concerns opens a new chapter in the history of oil consumption. While peak oil demand outside of the OECD may still be years away, peak oil demand growth could be in sight. Meanwhile, international crude markets, despite continued growth in oil demand, are projected to shrink in both volume and geographic diversity, with Asia the ever-growing magnet for global crude flows, and China overtaking the United States as the world’s top crude importer as early as this year. But it is the refining industry that may see some of the most consequential changes, as capacity further concentrates in four main regions – China and non-OECD Asia, the Middle East, Russia and North America – at the expense of Europe, Latin America and Africa. The continued globalisation of the refining industry, compounding the impact of a steep increase in the supply of non-crude liquids bypassing the refining sector altogether, will redefine the way products are delivered to consumers and the nature of energy security. As demand, feedstocks supply and processing capacity evolve, the risk of worrisome global product imbalances is also on the rise. If the last five years seemed eventful for the oil market and industry, there is every reason to believe that the next five will be no less transformative. Expectations of supply, demand, but also midstream and downstream capacity paint a picture of oil markets that by the end of the decade is quite distinct from today’s, which itself is a far cry from that of five years ago. The pace and scope of change will have far-reaching consequences not just for the oil market itself, but also for the broader economy, climate policy, international trade and energy security. This Report is produced under my authority as Executive Director of the IEA. Maria van der Hoeven Executive Director International Energy Agency MEDIUM-TERM OIL MARKET REPORT 2014 3 © OECD/IEA,2014 ACKNOWLEDGEMENTS ACKNOWLEDGEMENTS This publication was prepared by the Oil Industry and Markets Division (OIM) of the International Energy Agency (IEA). Its main authors are Lejla Alic, Toril Bosoni, Anselm Eisentraut, Charles Esser, Diane Munro, Matthew Parry and Andrew Wilson. Valerio Pilia and Ryszard Pospiech provided essential research and statistical support. Annette Hardcastle provided editorial assistance. Antoine Halff, head of OIM, edited the report. Keisuke Sadamori, director of the IEA’s Directorate of Energy Markets and Security, provided guidance. Other IEA colleagues provided important contributions including Christian Besson, Federico de Luca, Suleyman Bulut, Anne-Sophie Corbeau, Tim Gould, Alexander Körner, Olivier Parada, Kristine Petrosyan, Christopher Segar, Jan Stelter, Tali Trigg and Michael Waldron. The IEA Communications and Information Office provided production assistance and support. Particular thanks to Rebecca Gaghen and her team; Muriel Custodio, Astrid Dumond, Greg Frost, Angela Gosmann, Jean-Luc Lacaille and Bertrand Sadin. Questions and comments should be addressed to [email protected]. EDIUM ERM IL ARKET EPORT 4 M -T O M R 2014 2014 © OECD/IEA, TABLE OF CONTENTS TABLE OF CONTENTS FOREWORD .................................................................................................................................. 3 ACKNOWLEDGEMENTS ................................................................................................................. 4 EXECUTIVE SUMMARY ................................................................................................................ 11 The non-conventional supply revolution enters a new phase .............................................................. 13 OPEC supply experiencing turbulence .................................................................................................. 14 The policy ground is shifting under the biofuel industry ...................................................................... 15 An inflexion point in demand growth ................................................................................................... 16 OPEC spare production capacity may be lower than it appears ........................................................... 18 In crude trade, all roads lead to Asia ..................................................................................................... 19 The refining industry enters the age of globalisation ........................................................................... 20 Is a gasoline glut the latest threat to supply? ....................................................................................... 22 Key policy outcomes loom large in the medium term .......................................................................... 22 Other market-related medium-term developments............................................................................. 23 1. DEMAND ................................................................................................................................ 24 Summary ............................................................................................................................................... 24 Overview ............................................................................................................................................... 25 OECD ...................................................................................................................................................... 28 Americas ............................................................................................................................................ 29 Europe ..............................................................................................................................................