OPEC may be getting all the credit
for reviving the oil market, but it had a little help. While the Organization of Petroleum Exporting Countries did spur a 28 percent recovery late last year by announcing production cuts, supply isnâ€™t the only factor buoying the market: demand repeatedly beat expectations in 2016, and is set to surprise again.
Global oil consumption will surpass average growth rates for a third year in 2017 amid continued economic expansion in China and India, according to data from the International Energy Agency. With all the attention on OPEC, the role of demand in keeping crude prices above $50 a barrel has been overlooked, according to consultants Energy Aspects Ltd.
â€œWith all the focus on OPEC cuts and the response of US shale, very few werepaying attention to just how rampant demand growth has been,â€ said Amrita Sen, chief oil analyst at the London-based company. â€œIn fact, demand is roaring ahead.â€
After plunging crude prices propelled fuel consumption growth to a five-year high in 2015, the Paris-based IEA, which advises most major economies on energy policy, predicted the stimulus of cheap oil would wear off. Yet after a series of upward revisions, its estimate of demand growth in 2016 now stands a third higher than when it was first introduced, at 1.6 million barrels a day, or 1.7 percent.
That compares with an average of 1 million barrels a day, or 1.1 percent, over the previous 10 years. In its latest report on Feb. 10, the IEA also raised its prediction for 2017 demand growth, forecasting an increase of 1.4 million barrels a day.
â€œStronger-than-expected demand is helping to re-balance the market,â€
said Jason Bordoff, director at the Center on Global Energy Policy at Columbia University. â€œColder weather, low prices, also stronger growth projections for emerging economies like China or Indiaâ€ are driving the expansion, he said.