Text I World oil market prospects for the second half of the year [...] World oil demand in 2H14 is anticipated to increase by 1.2 mb/d over the same period last year to average 92

Text I

World oil market prospects for the second half of the year

[...] World oil demand in 2H14 is anticipated to increase by 1.2 mb/d over the same period last year to average 92.1 mb/d. OECD (Organisation for Economic Co-operation and Development) demand is projected to decline by around 60 tb/d, despite positive growth in OECD Americas, mainly due to a general improvement in the US economy. OECD Europe and OECD Asia Pacific are expected to see a lesser contraction than a year earlier. However, oil demand growth in OECD Asia Pacific will largely be impacted by any restart of nuclear power plants in Japan. Non-OECD countries are projected to lead oil demand growth this year and forecast to add 1.3 mb/d in 2H14 compared to the same period a year ago. Nevertheless, risks to the forecast include the pace of economic growth in major economies in the OECD, China, India and Russia, as well as policy reforms in retail prices and substitution toward natural gas.

On the supply side, non-OPEC oil supply in the second half of the year is expected to increase by 1.2 mb/d over the same period last year to average around 55.9 mb/d, with the US being the main driver for growth, followed by Canada. Production in Russia and Brazil is also expected to increase in 2H14. However, oil output from the UK and Mexico is projected to continue to decline. The forecast for non-OPEC supply growth for 2H14 is seen lower than in the first half of the year, but could increase given forecasts for a mild hurricane season in the US Gulf. Less field maintenance in the North Sea and easing geopolitical tensions could also add further barrels in the coming two quarters. OPEC NGLs are also projected to continue to increase, adding 0.2 mb/d in 2H14 to stand at 5.9 mb/d.

Taking these developments into account, the supply-demand balance for 2H14 shows that the demand for OPEC crude in the second half of the year stands at around 30.3 mb/d, slightly higher than in the first half of the year. This compares to OPEC production, according to secondary sources, of close to 30.0 mb/d in May. Global inventories are at sufficient levels, with OECD commercial stocks in days of forward cover at around 58 days in April. Moreover, inventories in the US – the only OECD country with positive demand growth – stand at high levels. Non- OECD inventories are also on the rise, especially in China, which has been building Strategic Petroleum Reserves (SPR) at a time when apparent demand is weakening due to slowing economic activities. [...]

Available at: <http://www.opec.org/opec_web/static_fi les_project/ media/download/publications/MOMR_June_2014.pdf>. Retrieved on: 15 June 2014. Adapted.

According to Text I, the statement “OECD Europe and OECD Asia Pacific are expected to see a lesser contraction than a year earlier” implies that the oil demand in those countries