At a time when every oil market observer is preoccupied with current oil market development and uncertainties surrounding its evolution, the Opec Secretariat came out with its annual “World Oil Outlook 2017”. It lists the impact of the momentous development of a year ago when the Organisation of Petroleum Exporting Countries (Opec) and non-Opec signed a Declaration of Cooperation to reduce production by 1.8 million barrels a day (mbd), which did so much to change perceptions and expectations.

Oil prices which were close to $30 a barrel in January 2016 are now at over $60. Major producers, perhaps for the first time, have found the advantages of cooperation and discipline, which will likely continue. As usual any long-term forecast starts with a set of assumptions and WOO’s is no different. It assumes the world population to increase from 7.3 billion in 2015 to 9.2 billion in 2040 though the world continues to age and birth rates have dropped.

Global gross domestic product (GDP) between 2016 and 2040 is expected to grow at an average 3.5 per cent a year, driven by higher growth in developing countries where the “size of the global economy in 2040 is estimated to be 226 per cent that of 2016”. Naturally, policies of consuming and producing countries do drive energy markets “beyond purely market-driven forces”.

Therefore, the drive for carbon emission reduction, increased energy efficiency and the increasing penetration of renewables and electric vehicles as well as advances in technology must be taken in consideration. Contrary to all expectations, WOO does not make any assumptions about the evolution of oil prices. Unless it is done internally, I don’t know how Opec’s model would work.

The forecast tells us that between 2015 and 2040, total primary energy demand is forecast to increase from 276 million barrel oil equivalent a day (mboed) to 372, at 1.2 per cent a year. While OECD energy demand is expected to be flat or slightly rising, the developing countries are expected to increase their consumption steadily with India and China in the vanguard.

While “oil and gas are still expected to supply more than half of global energy needs by 2040”, gas is expected to be the largest contributor with an increase of 34-mboed and reaching 93-mboed by 2040. Without the drive for renewables, gas demand might have been higher. All renewables (hydro, biomass and others) are expected to increase from about 39- to 68-mboed in the period.

The report states that “the share of fossil fuels in the global energy mix stood at 81 per cent in 2015. It is estimated to reach 74 per cent by 2040”, even though coal and oil demand would be increasing at lower rates.

What is behind this upbeat outlook is that Opec sees the “Rapid economic expansion in the developing world, particularly in developing Asia” where “in 2015, average energy consumption in the developing countries had almost tripled compared to 1970”. But energy poverty remains a critical issue.

Oil demand may increase from 95.4-mbd to 102.3-mbd in 2016–22, and expected to increase to 111.1-mbd in 2040, though OECD’s may shrink by 8.9-mbd.

As for non-Opec supply, the forecast is that it will increase from 57- to 62-mbd in 2016 -22, mostly in the US and to a lesser extent in Brazil and Canada. But by 2040, non-Opec supply may decline by 0.3-mbd as US tight oil surpasses its peak around 2025 and begins to decline. Other non-Opec fields may hardly keep up with the anticipated decline rate of 5.4 per cent.

Consequently, the report sees “demand for Opec crude stays relatively flat at just over 33-mbd until 2025”, but “rises steadily, reaching 41.4-mbd in 2040”.

But the market is fraught with uncertainties. In case of higher economic growth, demand would increase to 114-mbd while it could go down to 108 in case of lower economic growth. Higher than expected penetration of electric vehicles may reduce 2040 demand to 109-mbd. Accelerated energy efficiency improvements could reduce it by 3.2-mbd.

With technology advances and the possibility of higher oil prices, non-Opec supply could be more by 4.6 mbd in 2040 or less by 3.6 mbd if less investment is carried there. Naturally, the occurrence of these uncertainties, and there may be others, would impact Opec production.

But the outlook seems to make a balance between the upsides and the downsides, which will make watching the oil market interesting. There is always room for analysts and observers.