LONDON/NEW YORK (Reuters) - Global oil output will rise faster than first expected in 2010 with a strong rebound in prices from the depths of the crisis ensuring growing demand will not stretch supplies for at least another year.
A Reuters poll of 10 top oil-tracking analysts and organisations found oil demand would rise by 1.5 million barrels per day (bpd) this year to hit 86.1 million bpd, the highest level since 2007.
At the same time, the rise in production from outside the Organization of the Petroleum Exporting Countries and output of natural gas liquids (NGLs) from OPEC members is seen growing by 1.2 bpd in total.
Rising output from the OPEC producer group is expected to keep stocks of crude oil well above the five-year average after they bloated during the crisis.
Michael Wittner, head of global oil research at Societe Generale said higher prices meant producers have been able to invest more, slowing declining output from the North Sea and Mexico while output in North America and Russia has expanded.
”Company investment bounced back more quickly than we thought,“ Wittner said. ”Non-OPEC supply surprised to the upside in the first half of the year -- that’s why we did not get the stock draw we expected.
“Based on that, the whole rebalancing process has been delayed. I think it’s still going to happen, but it’s been delayed.”
A drop in demand saw oil prices crash from record highs near $150 a barrel on the eve of the financial crisis to around $40 a barrel in late 2008 and early 2009, raising fears prices would spike again if investments in future output were cancelled.
But with prices averaging over $75 a barrel since July 2009 -- the second highest ever over a 12 month period -- investment has been maintained, leading some to speculate the ‘boom and bust’ so common over the history of the oil industry has been avoided this time.
“Our demand-supply model indicates that, at current production levels, global inventories (the clearest indicator of market balance) will remain high through 2010 and then decline only slowly through 2011,” said Helen Henton, global head of energy and environmental research at Standard Chartered.
“It will be difficult for crude oil prices to gain any upward momentum in the context of a strengthening U.S. dollar and volatile risk appetite, until there is a significant tightening of the underlying balances.”
Click here to watch a Reuters Insider television interview on the Reuters oil poll with Standard Chartered's Helen Henton link.reuters.com/vud95m
Higher than expected output from non-OPEC members has contributed to a dip in prices from a 19-month peak above $87 a barrel in early May to around $71 currently.
Analysts polled by Reuters on the outlook for the oil price have reduced their estimates for the last two months after more than a year of rising expectations.
The International Energy Agency, the adviser to 28 industrial countries that has historically been concerned about supplies, has increased its estimate for non-OPEC output by 500,000 bpd since March to 52.3 million bpd this year.
Goldman Sachs, one of the biggest investment banks in commodity markets, has also upped its forecast by 1.2 million bpd since March to 52.1 million barrels. Barclays Capital raised its estimate by around 400,000 bpd.
“In general, demand has been very strong with growth not just in the developing world but the United States as well, though Europe remains the laggard,” Barclays Capital analyst Amrita Sen said.
”Non-OPEC supplies have also surprised to the upside, but there is uncertainty if this will continue in the coming years, with the Gulf of Mexico oil spill likely to see more legislation and costs for producers starting to rise in the medium-term.
Booming economies in Asia are expected to provide the vast majority of demand growth. China alone is expected to account for between 700,000-800,000 bpd of any increase this year, though most analysts see the trend moderating in 2011.
Early estimates for total global demand growth in 2011 average around 1.4 million bpd, slightly down on this year.
OPEC is expected to need to pump an extra 400,000 bpd this year compared with 2009, with 29.3 million bpd required from the producer group to balance the market.
In May, OPEC output including Iraq (which is not subject to output quotas) was 29.29 million bpd, though it dipped slightly in June.
Higher prices and recovering demand has seen compliance with output targets slip from a peak of around 80 percent in early 2009 to between 50 and 55 percent currently.
In 2008, OPEC was required to pump around 31.5 million bpd. The IEA estimates OPEC’s sustainable production capacity at 35.1 million bpd.
NGLs are one aspect of supply, OPEC members can increase without circumventing output targets.
The group’s NGLs production was expected to hit 5.2 million bpd this year, up by 20 percent since 2008.
Reuters Global Oil Forum will host a Q+A with John Kemp, Reuters Commodities Analyst, on the survey at 1400 GMT on Tuesday
* All forecasts rounded to 1 decimal place
* Call on OPEC inc. Iraq = World Demand minus Non-OPEC Supply minus OPEC NGLs