Barclays predicts oil demand to triple next year 18/11/15Barclays Corporate Banking Plc predicts that the demand for oil will triple in 2016, and that oil price, which is now ranging about US$45 per barrel, will rise to US$50 per barrel by end-2015 and to US$60 per barrel next year. The expected increase in oil price will be spurred by a sustained doubling of growth in global demand to up to four million barrels per day, it said in a statement today. It said the topic was discussed at a recent event hosted by the bank's corporate foreign exchange team, to which it had invited influential industry professionals to discuss the current challenging market, and the future of the North Sea, among others. "There is no doubt that the UK North Sea oil and gas (O&G) industry is under pressure right now but we do feel that signs of relief are there, and the forecast for US$60 oil in 2016 with oil demand growth above trend again is encouraging," said Barclays head of O&G Walter Cumming. Another topic discussed was the differences between the oil crash of the mid-1980's to that of 2014/15, primarily the reduction of the Organisation of Petroleum Exporting Countries' (OPEC) influence on global O&G supply due to the decline in its spare capacity from between 14% and 16% of global oil demand to less than 4%. "While Saudi Arabia is producing close to record levels [now], it is not expected that the Saudis would break the 11 million barrels per day barrier, which creates a limitation on the amount of oil OPEC can produce, and therefore the influence it ultimately has," said Barclays. It also noted that since OPEC decided against reducing production in November 2014, global oil demand has recovered strongly unlike in the 1980s and global demand growth rate has tripled to 2.1 million barrels per day, driven mainly by end-consumers' reaction to the new price of oil. However, Barclays forecasts that the excess supply situation will continue throughout 2015 with Saudi Arabia producing close to record levels at 10.310.4 million barrels per day, while Iraq continues to be a strong supplier. The recently lifted Iran sanctions could also affect supply, though increased production is unlikely to start until the spring of 2016, or later, as the region still has 45 million barrels of oil in tankers which will be released first, it noted. The banking group went on to say that the US shale industry, with its lower cost base and rapid set-up characteristics, has taken over from Saudi Arabia as the new swing producer. "Despite initial resilience, Barclays anticipates a significant reduction in the supply of US shale in the fourth quarter of 2015 as well as the first half of 2016. This is where we can expect the industry to see the real battle between global supply and demand take place," it said. The group also discussed how the bedrock of a stable O&G industry is a strong US dollar, and the currency remains the global outperformer. "Barclays expects the greenback to overtake in the coming financial quarters owing to the US economy's better return to capital, safety characteristics and superior growth outlook," it said.