London / New York: Growing world oil use will likely outpace the rate of new supplies in 2010, eroding the huge stockpiles of crude which have mounted around the world since the start of the global economic crisis.

According to a Reuters poll of 10 top oil-tracking analysts and organisations, oil demand is predicted to rise by 1.3 million barrels per day (bpd) next year to 85.9 million bpd.

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 just 800,000 bpd in total.

“The key question for prices is supply,” Barclays Capital analyst Costanzo Jacazio said.

“2010 is really a bridging year -- if the economies continue to perform as well as they have been doing during the early stages of the recovery, then I think by 2011 we’ll be seeing the demand numbers at or above where they were in 2008.”

Non-Opec output is seen averaging 51 million bpd in 2010, up from 50.8 million bpd, while Opec output of NGLs -- which are not subject to the producer group’s production quotas -- are expected to rise to 5.6 million bpd, up by more than 20% since 2008.

If Opec members can maintain current adherence levels to present output quotas, with group output including Iraq assessed around 28.9 million bpd, crude oil inventories could fall by almost 150 million barrels next year.

Demand for OPEC’s crude is seen at 29.3 million bpd.

At the end of September, the International Energy Agency assessed oil stocks in the Organisation for Economic Co-operation and Development (OECD) at 60 days of forward cover, 120 million barrels above the five-year average.

Divergence

Doubts surrounding the eventual strength of the economic recovery and how oil demand will respond following the impact of record prices, a global recession and increased environmental initiatives has seen many analysts’ views diverge.

Investment banks Goldman Sachs and BofA-Merrill Lynch have the most bullish outlook for demand, projecting 86.4 million bpd and 86.7 million bpd respectively.

Barclays Capital sees demand at 1 million barrels below Goldman’s estimate because of increased conservation efforts, but conversely sees non-OPEC supplies 1.1 million barrels lower than its U.S. rival due to falling investment during the crisis.

Deutsche Bank sees demand as relatively weak in 2010, at just 86 million bpd, despite forecasting the world economy will grow at 3.7 percent in 2010 - well above the International Monetary Fund’s forecast of 3.1% global growth.

“The question is where’s the demand growth? Year-on-year figures in the U.S. show demand still struggling,” said Adam Sieminski, Deutsche Bank’s head of energy research.

“It appears the economic recovery is not coming in energy-intensive or oil-intensive sectors. We may still be seeing people being careful about consumption -- if they have two cars they’ll be driving the smaller one.”

Demand growth returns

The expected demand increase in 2010 will be the first year to show average growth since 2007, before record prices and the economic crisis slashed consumption.

Global oil demand has fallen by almost 2% since 2007, when average annual consumption hit an all-time high around 86.2 million barrels daily.

The steep drop in demand saw oil prices crash from record highs of almost $150 a barrel in July 2008 to below $33 a barrel in December last year.

Since then prices have more than doubled to just below $80 a barrel as Opec -- whose member countries pump more than one in every three barrels of oil -- tried to cut output quotas by 4.2 million barrels, or 5% of world demand.

Demand growth is expected to be strongest in countries outside the OECD, with China leading the way.

“We see a healthy demand recovery of 1.5 million barrels next year, there’s only so much you can contract,” said Sarah Emerson, director of Energy Security Analysis Inc. in Boston.

“(Demand) growth in China next year should be significant and the US will go from two years of contraction to growth.”

The Chinese economy is expected to grow by around 8% in 2009 and may post even stronger growth next year. Implied Chinese oil demand in October was up more than 10% year-on-year, customs data showed on Monday.

Inside the OECD, the US is seen posting a small recovery in demand. But many analysts remain doubtful about the strength of growth with some arguing oil use may never revisit highs of earlier this decade in North America and Europe.

“We’re not going to be in an environment when prices will shoot back to anything like $120 a barrel in 2010,” Jacazio at Barclays Capital said.

“(But) we still see oil demand growth next year outpacing non-Opec supplies and NGLs combined.”