Recovery in underlying oil demand and lower inventories will make headlines in the next two years, with "traditional fundamentals" shaping the energy picture once more. This is according to Deutsche Bank senior analyst Adam Sieminski.

The analyst compared key statistics from three leading agencies—OPEC Secretariat, the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA)—against his estimates. Averaging the data, he found that daily demand is forecast to rise in 2010 by about 1.4%, or 1.2 million barrels. The OPEC estimate for demand growth was the lowest, in keeping with its history of conservative demand estimates.

Sieminski forecasts world gross domestic product (GDP) growth to be 4% in 2010, a bullish outlook compared with IEA and OPEC forecasts of less than 3%. Initially driving GDP growth will be fiscal stimulus dollars and an inventory swing, followed by consumer-durables and business-equipment spending, and residential investment.

Key drags will be ongoing household deleveraging, a delayed return to normal credit conditions, a rebound in imports, and government regulatory and monetary-policy uncertainty.

"We note that our forecast for GDP is very high in comparison (to that of others in the comparison group) and this supports the idea of an oil-demand recovery. Most forecasts for OPEC natural gas liquids daily production growth for 2010 remain centered on 700,000 barrels, but we expect more growth in 2011 as liquefied natural gas (LNG) facilities are streamed.

"We believe that the total call on OPEC crude is unlikely to improve much in 2010 but, as the economy normalizes and non-OPEC output fades, the need for OPEC oil growth from 2011 to 2015 should increase," he says.

Pointing out that oil demand fell 1.3 million barrels per day in 2009, he believes daily, global oil demand will jump by 1.3 million barrels per day this year. "Most of that growth should be in the non-OECD nations. Oil-demand (per day) growth of 1.3 million barrels is consistent with global GDP growth of 3.5%."

Daily non-OPEC supply grew by 600,000 barrels in 2009, and he expects a gain of 200,000 in 2010. Increases in supply from Azerbaijan, Australia, Brazil, China, Russia and the U.S. should more than offset supply declines in Norway, Mexico and the U.K., he adds.

"We expect that 2010 will mark the transition back to the traditional fundamentals relating to supply, demand and inventories in contrast to financial, currency and equity-market drivers that we believe dominated 2009."

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