(EnergyAsia, June 24 2014, Tuesday) — Will rising oil prices crimp global demand growth, stimulate supply and hurt global economic growth?

As Brent surged to a nine-month-high of more than US$115 a barrel in response to the latest outbreak of conflicts in the Middle East, the Organisation of Petroleum Exporting Countries (OPEC) may have to soon revise its forecasts for this year’s global oil demand and economic growth.

In its latest June report, the cartel said it expects this year’s global oil consumption to reach 91.14 million b/d (compared with 91.15 million in its May report) and the world economy to grow by 3.4%.

The forecasts were made before military groups linked to the Islamic State of Iraq and Syria (ISIS) advanced on the two countries with the violent and brutal capture of several key cities and oil towns. Brent crude has surged more than US$7 to US$115 a barrel while WTI has risen more than US$5 a barrel over the past two weeks.

“World economic growth figures remain unchanged at 3.4% for 2014 and 2.9% in 2013. No revisions have been made in the major OECD economies. OECD growth is forecast at 2.0% in 2014,” OPEC said.

“The forecasts for China and India also remain unchanged at 7.5% and 5.6%, respectively. Risks to the growth forecast have emerged recently as industrialised economies are facing some headwinds, amid slowing momentum in the emerging economies.

“World oil demand is expected to increase by 1.14 million b/d in 2014, in line with the previous month’s forecast. More than half of oil demand growth this year is seen coming from China and the Middle East. Estimated world oil demand growth in 2013 was also left unchanged at 1.05 million b/d.”

OPEC expects the world’s demand for its crude to slip by 400,000 b/d to 29.7 million b/d in 2014.

On the supply side, OPEC expects production from outside the cartel to increase by 1.44 million b/d this year, up from its previous forecast of 1.38 million b/d. Most of the increase will come from the US, Canada and Brazil. US liquids supply is projected to grow by 950,000 b/d to reach 12.13 million b/d in 2014.

Oil production to rise in Australia and New Zealand

In Asia, OPEC expects rising oil production in Australia and New Zealand in 2014 to be slightly offset by declining output in the rest of the region.

Australia’s oil production is expected to average 430,000 b/d in 2014, up by 30,000 b/d from a year ago, thanks to new supplies coming from Vincent, Montara, the Pyrenees, North West Shelf (NWS), Fletcher and the Cooper Basin.

Oil production in the rest of Asia is expected to decrease by 20,000 b/d in 2014 to average 3.55 million b/d, with rising supply in Malaysia offset by declines in Indonesia, Thailand and other countries. Brunei is expected to produce 140,000 b/d while Malaysia will raise supply by 20,000 b/d to average 670,000 b/d this year. Vietnam’s oil production is forecast to remain stagnant at 380,000 b/d while Indonesia will see a further 10,000 b/d drop to 930,000 b/d after experiencing a 50,000 b/d decline in 2013.

OPEC expects India’s oil production to average 860,000 b/d, down 10,000 b/d from 2013.

June 2014
Table 1. World oil demand, million b/d
2012      2013     2014    2014/13 %
Americas         23.62      23.95     24.15    0.84
Europe         13.77      13.60    13.42    -1.25
Asia Pacific         8.58     8.36     8.24    -1.44
Total OECD         45.97     45.90     45.81    -0.20

Other Asia         10.86      11.06     11.29    2.08
China             9.74     10.07     10.39    3.18
Latin America         6.27      6.50     6.73    3.54
Middle East         7.59     7.81     8.12    3.97
Africa             3.47     3.55     3.64    2.54
FSU             4.41     4.48     4.53    1.11
Other Europe         0.64     0.64     0.63    -0.01
Total world         88.96     90.01     91.14    1.26
Previous estimate     88.96     90.01     91.15    1.27

June 2014
Table 2. World economic growth
World    OECD    US    Japan    Eurozone    China
2013        2.9    1.3    1.9    1.5    -0.4        7.7
2014*        3.4    2.0    2.4    1.3    1.0        7.5
2014**    3.4    2.0    2.4    1.3    1.0        7.5
*June forecast, ** May forecast