Something's happening in world oil market

Come second quarter of next year, oil demand from emerging markets and developing countries, especially oil producing ones, is expected to exceed that from countries of the Organization for Economic Cooperation and Development (OECD). It is, “a trend that is unlikely to be reversed,” observed the International Energy Agency (IEA) in a recent report. The expected change will have implications and repercussions that exceed the oil market into other socioeconomic and political developments worldwide.

It was a century ago that a single decision by then British Admiralty Minister Winston Churchill to use oil instead of coal as a source of energy for the British war fleet has put its prints in human history. The black gold, as it came to be called, turned into a strategic commodity tied more with politics as well as economy and to the extent some think it has nothing to do with the market basic and fundamental rule of supply and demand than with high politics and war rooms.

For more than a century it was this strict and direct relationship of the oil market that mirrors what is going on in the world of politics and vice versa.

The new shift in demand and the lead of the emerging markets over OECD is yet another proof of that trend.

According to the IEA forecast, oil demand in emerging markets and oil producing countries will top 45.7 million barrels per day (bpd) that is some 600,000 bpd more than expected demand from OECD countries. Aside from the burgeoning economies of China, India, Brazil and Argentina, the oil producing countries in the Gulf as well as Russia and others will be consuming more.

That is attributed to a number of factors. On the top of them is the high income of these countries given the rising oil prices, which helped in fueling economic growth. There is also the factors of growing population and fuel subsidies.

On the other hand the general world oil demand that has settled around 700,000 bpd last year is expected to increase by mere 100,000 bpd to reach 800,000 bpd expected growth in world oil demand by next year. Total oil demand then will top 90.9 million bpd. Of that, OPEC countries are expected to provide 30.5 million bpd leaving the rest to non-OPEC producers to appropriate the difference.

Despite its reduced contribution in meeting world demand, OPEC production came along way from the 19.5 million bpd it used to produce back in 1998, but notably less than the 33 million it pumped four years ago before world economy was hit by the financial and economic crisis and still reeling under its impact.

The shift in oil demand that will have ripple effect ramifications in various areas and all over the world is yet to unfold, but one can expect impact on certain areas. One of the first areas that need tackling is the flow of information and transparency on what actually goes on in these emerging markets.

People still remember how everyone was puzzled back in 2005 to see that some kind of an unjustified strong oil prices. The reason was discovered later when it became clear that it was the Chinese strong demand that nobody was aware of, which was pushing prices up.

For more on this Click Here

Recent Articles

Oman: Linking up the food chain
New investments in Oman’s agro-industries will not only help bolster the Sultanate’s food security and ease reliance on imports, but also have the capacity to provide increased business opportunities

Bahrain: Legal changes expected to boost property market
New incentives for property buyers could stimulate activity in the residential sector of Bahrain’s real estate market, a segment that is beginning to see signs of limited recovery.

On May

Bahrain: Legal changes expected to boost property market
New incentives for property buyers could stimulate activity in the residential sector of Bahrain’s real estate market, a segment that is beginning to see signs of limited recovery.

On May

Qatar: Expanding energy horizons
The world’s largest exporter of liquefied natural gas (LNG) is spreading its wings into energy ventures far from the vast reserves on its own doorstep. Qatar is investing in shale-related projects in

Kuwait: Upward trajectory for KSE
The Kuwait Stock Exchange (KSE) had a positive start to 2013, with the index steadily moving up to reach multi-year highs in May. While local investors are driving much of the recent activity, foreig