Update on Oil Demand in Persian Gulf -- Will Affect Bakken Future

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The Persian Gulf states will continue to dominate oil supply, backed by huge reserves. Gas is another important export product for the region, mainly in the form of liquefied natural gas (LNG).

OPEC policy and a relatively high level of quota adherence meant a meaningful downturn in 2009 regional supply, but there was noticeable growth in 2010 thanks to quota-busting activities of certain members. Following the June 2011 OPEC summit, which produced an unusually pronounced fissure between price 'hawks' and 'doves,' OPEC crude output exceeded the cartel's total quota (24.85mn b/d) by about 2mn b/d. The lion's share of this excess was produced by Saudi Arabia.

Iraq remains the region's 'wild card', with a medium-term production potential of around 6mn b/d by 2015. The country will likely have to downgrade its ambitious 12mn b/d long-term production goal to around 8-9mn b/d owing to infrastructure bottlenecks and politico-security risks. In the short term, however, Iraqi oil output growth is likely to be stellar.

For the region as a whole, we expect to see output capacity to reach 29.93mn b/d by 2015, representing a gain of 23% on 2010. With regional consumption set to reach 8.73mn b/d in 2015, the growing export capability is clearly vast. The Middle East region will have an export capacity of 22.42mn b/d in 2015, up from 17.68mn b/d in 2010.