LONDON, July 24: Oil consumers and producers expect a strain on world markets to ease in 2009, giving some respite from record prices -- if supply rebounds from years of underperformance.

The International Energy Agency (IEA), adviser to industrialised countries, and producer group Opec both point to rising supply from outside Opec in 2009 as well as slightly lower growth in global demand.

Others are not so sure.

“It worries me that everyone is projecting this relatively strong growth in non-Opec output,” said Julian Lee, senior analyst at the Centre for Global Energy Studies, a London-based forecaster.

“This leads to a sense of complacency that everything will be okay and that Opec doesn’t need to increase production.” A more comfortable balance between supply and demand could ease pressure on prices that hit a record high of $147.27 a barrel earlier this month, potentially lowering fuel costs for consumers and businesses.

In its first look at 2009, the Organisation of the Petroleum Exporting Countries said in a July 15 report that world consumption would rise by 900,000 barrels per day next year, while supply beyond the Opec would expand at a faster rate of 940,000 bpd.

Due to the rise in non-Opec supply and higher output of natural gas liquids in Opec countries, Opec sees demand for its oil falling by 710,000 bpd from 2008 -- what it called the first significant drop since 2002.

But even some in Opec say supply is the risk to a more comfortable market next year, partly due to circumstances in certain countries within the organisation.

Violence and sabotage have cut output in Opec members Nigeria and Iraq, while oil investors remain concerned that Iran’s dispute with the West over Tehran’s nuclear work could escalate and affect Iran’s oil exports.

“The uncertainty on the supply side is even more than the possibility of softening demand,” Shokri Ghanem, head of Libya’s Opec delegation, told Reuters. “There are so many uncertainties.”

Caution

Countries outside Opec pump about three in every five barrels of oil, while the 13 members of Opec make up the balance.

Others doubtful of a supply rebound in 2009 include Barclays Capital, a consistent oil-price bull which expects that the need for Opec oil will rise, rather than fall.

“We think that the existing misalignment between oil demand growth and non-Opec supply growth will continue into next year,” the bank said.

Barclays expects non-Opec supply will fall slightly in 2009 and says a peak in total non-Opec output including biofuels and non-conventional oil, while too early to date definitively, is “pretty much with us now.” For the IEA, next year’s growth in non-Opec supply will be helped by the Caspian region, as well as Brazil, Asia and biofuels. Even so, there are several reasons why output has fallen short in recent years.

Delays at new fields, faster-than-expected declines at existing sites and unforeseen events such as hurricanes in the U.S. Gulf of Mexico have meant production came in lower than first thought.

Oilfields in places such as the North Sea and Mexico are seeing lower supply while output in Russia, the world’s second-largest exporter and the engine of growth outside Opec in recent years, has faltered.

Growth in oil demand, while expected to be slightly slower next year as the world economy slows, could prove more robust than expected, potentially keeping the heat under prices.

The International Monetary Fund earlier this month revised up its estimate for world economic growth next year to 3.9 per cent from 3.8 per cent previously expected.

While there is no guarantee that history will repeat itself, Barclays suggests investors be cautious before expecting a well-supplied market next year. The CGES expects demand for Opec oil to be relatively flat in 2009.

—Reuters