IEA report looks at oil, gas market prospects through 2016

(St Petersburg) — 16 June 2011

Annual growth in oil demand could average 1.2 million barrels per day (mb/d) between now and 2016, while natural gas demand could grow by around 500 billion cubic meters – around 2.5 times Russia’s current gas exports – during the same time, according to the IEA’s Medium-Term Oil and Gas Markets 2011.

The report, launched today at the St. Petersburg International Economic Forum, seeks to make sense of the increased divergence in oil and gas markets by providing a comprehensive outlook for fundamentals through 2016.

“This report shows that oil’s twilight as an industrial fuel continues, and it becomes ever more concentrated in the transport and petrochemical sectors,” said International Energy Agency Executive Director Nobuo Tanaka. “Gas on the other hand continues to increase in power generation as well as industry and space heating. In terms of market structure and pricing, oil is a genuinely global commodity, while gas markets, although globalising, remain bound by some key regional constraints, not least in terms of transportation.”

For oil, the projections are based on prevailing futures prices, which form an assumption as opposed to a price forecast. The crude price assumption used in the outlook averages $103 per barrel, or around $20 more than in last year’s MTOGM. Based on this assumption, the report projects the following outcomes in oil markets:

The report also examines recent thinking on the debate about causes and remedies for oil price volatility, noting that neither volatility nor speculative activity appear out of line with historical levels. It discusses the feedbacks between exchange rates and crude oil prices, and itemises some of the problems facing derivatives market regulators as they grapple with minimising systemic risk and potential market manipulation.

The report makes the following projections for the gas market:



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