Now that the effects of the financial and economic crisis are believed to be behind us, the prospects for the oil market may be viewed more positively.

The Organisation of Pet-roleum Exporting Countries (Opec) just published its "World Oil Outlook 2010", an annual in-house study which has been made public only for the second time. The intervention of governments after the crisis of 2008 has led to relative stabilisation of the world economy where oil prices recovered to average just over $75 (Dh275.40) per barrel so far in 2010. Oil demand resumed growth and with investment in upstream projects an increase in spare production capacity is imminent.

Against this background, Opec no longer expects the world economy to remain "gloomy" as the "recovery from the recession has been swifter than previously thought, but remains fragile" and the growth of 2010 at 3.9 per cent is likely to continue at a slightly lower rate until 2014. Long-term growth is robust and depending on population growth and productivity gains, average growth to 2030 is likely to be 3.5 per cent compared to three per cent in last year's forecast.

The world population is projected to increase from 6.8 billion in 2009 to 8.3 billion in 2030 with an attendant productivity increase due to technological progress, education and training.

While oil price assumptions are still based on the behaviour of upstream costs and the cost of marginal liquid barrels such as Canadian tar sands oil, Opec sees a price path which is also influenced by economic recovery and is more optimistic than last year's where prices could be in the range of $75 to $85 per barrel in 2009 up to 2020 and then rising sharply to $106 per barrel by 2030. No changes in energy policies, particularly in the US Energy Independence and Security Act, and the EU climate change and energy efficiency legislative packages have been assumed and their impact on the oil and energy demand is reflected.

While Opec sees the aims of increasing the use of biofuels to be "overly optimistic", the impact of such policies is a reduction in demand for Opec oil by 4 million barrels per day (bpd) by 2020, a sizeable impact indeed.

With these assumptions in mind, the Opec reference case projection for energy demand is a growth from 227 million barrels of oil equivalent per day (boed) in 2008 to 323 million in 2030.

Growth outlook

All energy sources will experience growth but biomass and other renewable are expected to grow faster at 3.3 per cent or from 9.9 million boed in 2008 to 24.3 million in 2030 and fossil fuels are expected to supply 80 per cent of demand in spite of the growth in nuclear and renewable energy while oil is seen growing at the low rate of 0.9 per cent a year and its share falling to just over 30 per cent.

Oil demand to 2014 is now much better than that projected a year earlier and is likely to be close to 90 million bpd, more than 5 million bpd over demand in 2009.

However, Opec projections to 2030 are similar to those of last year as demand is likely to grow to only 105.5 million bpd, much less than forecast a few years before the financial crisis. Some would say this is conservative, but it could be borne out by its closeness to other forecasts and the possibility that higher economic growth impact is countered by the higher price path projected. Opec sees 75 per cent of the growth to be in developing Asia. Overall OECD (Organisation for Economic Cooperation and Development) demand is likely to fall by 2.4 million bpd, but this will be offset by the expected growth of 22.5 million bpd in the developing countries and just less than 1 million bpd in emerging economies. The transportation sector will contribute the majority of the growth in oil demand but petrochemicals demand and other sectors will also contribute. OECD oil demand is forecast to fall in all sectors.

On the supply side, many projects that were cancelled or delayed by the crisis have resumed and therefore non-Opec crude supplies are likely to grow by 6 million bpd to 2030. Conventional oil's share will decline but the more expensive non-conventional supplies will more than offset it. Opec's crude supply having fallen in the last few years is likely to increase very little to 2014 but will resume growth to 38.7 million bpd in 2030, which is just over 2 million bpd lower than last year's projections due to the better fortunes of non-Opec producers and an expected increase of 5.2 million bpd of Opec natural gas liquids. This reference case may be altered by many possibilities in the market.

The author is former head of the Energy Studies Department at the Opec Secretariat in Vienna.