Alternative oil sources fall short

By Javier Blas in London
Published: September 10 2008 19:50

The oil market is not only facing reduced supplies from Opec in the near future, following the cartel’s decision to cut “immediately” its output by about 500,000 barrels a day, but also lower non-Opec supplies than previously estimated.
On Wednesday, the International Energy Agency, the western nations’ oil watchdog, lowered its forecast of non-Opec supply growth to 270,000 b/d to the end of this year, less than a third of the 1m b/d it predicted at the start of the year.

In its monthly oil report the watchdog also cut the forecast for global oil demand growth this year and next because of the impact of high prices and weaker economic environments, particularly in the US and Europe. But it signalled that consumption growth in emerging countries, particularly China, remained strong.
Non-Opec supplies have faltered following big production falls in mature areas such as the North Sea, Mexico and Alaska and lower than expected Russian output. Without a large increase in biofuel production, non-Opec supplies could have dropped this year. The IEA estimates biofuel output growth at about 300,000 b/d this year.
Last year non-Opec production grew by 425,000 b/d and the IEA said it expected a rebound in growth in 2009 to about 760,000 b/d. But it warned the risk for its 2009 forecast was skewed to the downside.
Biofuels – mostly corn-based ethanol in the US and sugar cane-based ethanol in Brazil – represent only a fraction of global oil production but have been the largest source of non-Opec output growth in the past two years. The IEA forecast that biofuel output would grow next year by 340,000 b/d.
Copyright The Financial Times Limited 2008