Oil producers outside of Opec are expected to dominate crude capacity expansions to the end of the decade, with only Iraq set to undergo a significant increase in capacity.
Growth in crude production from non-Opec sources, such as the US and Canada, has been a key factor in price of oil falling more than 40 per cent in the second half of 2014.
The Paris-based International Energy Agency (IEA) forecasts that global oil production will increase by 9 million barrels a day (b/d) between 2013 and 2019 to reach 105 million b/d by the end of the decade.
Over this time, the Middle-East-dominated Opec will only increase its capacity by about 2 million b/d to about 37 million b/d, losing significant market share to other producers.
Iraq is expected to provide 60 per cent of this capacity increase, with about 1.3 million b/d expected to be added. Smaller volumes are forecast to be added in the UAE (550,000 b/d), Angola (350,000 b/d) and Venezuela (250,000 b/d), but capacity is set to decline in Algeria and especially Kuwait (-400,000 b/d).
Opec production capacity growth is at risk following the Islamic State in Iraq and Syria (Isis) campaign, says Keisuke Sadamori, the IEAs director of energy markets and security. Worsening political stability and security issues add downside risk in Iraq as well as Libya.
Although the market is well-supplied in the short term, Sadamori says that over the long term, the worlds reliance on crude from Iraq and the rest of the Middle East will increase. This makes instability in the region a major risk to oil market stability over the coming decades.
US oil production is expected to peak in the first half of the next decade and slowly decline, leaving the Middle East, Brazil and Canada as the worlds fastest-growing suppliers to the market. The IEA forecast that as much as 10 million b/d of new capacity could come on stream in the Middle East between 2020 and 2040.
The short-term picture of a well-supplied market should not obscure future risks, as demand rises to 104 million b/d and reliance grows on Iraq and the rest of the Middle East, says Sadamori.
The IEA predicts that trade in crude oil is going to shift further east. By 2019, two out of every three barrels of crude traded will be destined for Asia an increase of 2.6 million b/d to 22.1 million b/d by 2019.
The Americas, which is rapidly growing capacity from unconventional plays in the US and Canada, and deepwater offshore projects in Brazil, is set to become a net exporter by 2019.
Asia is by far the largest magnet for global crude exports as North America grows into a net oil exporter, says Sadamori.