World economic growth in 2017 has been supported by strong momentum across all major economies and sectors. Growth now stands at 3.7%, up from an initial forecast of 3.2% (Graph 1). The healthy momentum is expected to continue in 2018, with growth forecast at 3.7%. The OECD, supported by the US and the Euro-zone and to some extent Japan, is considered a vital element of this dynamic, with growth of 2.2% in 2018, only slightly below this year’s 2.3%. Moreover, upside from the envisaged tax-reform may lead to even higher growth in the US. In the non-OECD, the growth momentum in China is forecast to slightly decelerate in 2018 to 6.5%, compared to 6.8% in 2017. India is likely to rebound from sluggish growth of 6.5% in 2017 to show growth of 7.4% in 2018. Brazil and Russia are Graph 1: Real GDP growth for selected countries in 2018 forecast to continue their recovery at growth of 1.5% and 1.8% in 2018, after 2017 growth of 0.8% and 1.9%, respectively. As many economies now expand at or even above growth potential, the upside may be limited. Moreover, geopolitical developments and the pace of monetary policy normalisation will be aspects that will need close monitoring in 2018. Stability in the oil market also remains a key contributor for global economic growth.

World oil demand growth is estimated to have reached 1.53 mb/d in 2017, well above the initial forecast and maintaining the consistently healthy growth seen over the last three years. OECD Europe contributed most of the upward revisions, due to solid progress in the industrial sector in addition to strong transportation demand. In non-OECD, China oil demand growth has been robust in 2017 as the petrochemical and the transportation sectors continued to expand at a healthy pace and the overall economic activities improved from initial expectations. For 2018, the main assumptions behind the forecast are firm economic growth, lending support to industrial and construction fuels in both OECD and non-OECD. Expansion in the transportation sector Graph 2: World oil demand revisions from initial forecast Is expected to provide the bulk of oil demand growth. Growth in petrochemical demand is projected to be one of the fastest-growing contributors in US, China, South Korea and the Middle East. As such, world oil demand growth is estimated at 1.51 mb/d in 2018, compared to 1.26 mb/d in the initial forecast.

Non-OPEC oil supply growth 2017 performed well above initial market expectations to now stand at 0.81 mb/d. Higher-than-expected supply growth in the US, Canada and Kazakhstan have been the key contributors to the upward revisions, particularly US tight oil. As a result, US oil output is now expected to grow at 0.61 mb/d this year. The momentum seen this year is expected to continue in 2018 on the back of increased investment in US tight oil and improved well efficiency. Higher output from Canada, due to already sanctioned oil sands projects, will also contribute to next year’s growth. As a result, non-OPEC supply is expected to grow by 0.99 mb/d in 2018. The forecast is associated with considerable uncertainties, particularly regarding US tight oil developments. Based on the above forecasts, OPEC crude in 2018 is expected to stand at 33.2 mb/d, which is higher than the OPEC production levels seen this year. Combined with continued efforts by OPEC and non-OPEC to support oil market stability, this should lead to a further reduction in excess global inventories, arriving at a balanced market by late 2018.
Source: OPEC