Expectations for further increases in global demand and production during the next few years would help to strengthen the current recovery.” The supply of oil was assessed at 91.2 million barrels a day, which is 100,000 barrels a day less than a year earlier. The lower oil output reflected falls in production from three major producers, the US, Mexico and Angola. The increase in the world’s demand was 1.4 million barrels a day, or 6% more than in the year before. The rise was led by the rapidly growing economies of China and India, according to the report. In its supply and demand assessments, the IEA also made projections into the future. For example, IEA’s 2015 forecast was that there would be growth in Opec production of 0.5% a year, while non-Opec supply (which includes countries like Russia, Brazil and US) would increase by 0.6% a year in real terms during the period of 2011 to 2015. The main factors behind this forecast were a recovery in investment levels (to 3.8% of the global GDP), an increase in the efficiency of production (up by 1% in real terms), new oil-discovery resources and significant new fields coming into production, the statement said. The forecast for the production of shale oil (tight oil) was that this would increase by 5.6 million barrels a day, rising to more than 5.9 million barrels a day by 2020, after increasing to just over 4.5 million barrels a day in 2014. In its analysis of how the balance of power was shifting around in the oil markets, the IEA said that the US would soon overtake Russia as the largest oil producer in the world. “In 2009 the United States was the world’s largest producer and consumer of oil, but in 2016 its consumption will overtake its production, while Russia’s production declines.” The report said that OPEC production was expected to decline by 0.3 million barrels a day this year, even as it was projected that non-OPEC production would increase by 0.5 million barrels a day in the same period. By 2020, OPEC production was forecast to be 0.5% a year less than in 2014, while non-OPEC production would increase by 1% a year. OPEC accounted for 33% of the total supply, while non-OPEC supplied 62%. The IEA said that rising production of non-OPEC countries would reduce the effect of the recent production curtailments in Nigeria and Libya. It said that OPEC production in 2016 was projected to be 2.4 million barrels a day less than in 2014. “This decline will be a result of the combination of falling output from key members such as Iran, Venezuela, Nigeria, Libya and Iraq,” it said. The rise in demand for oil as a fuel is expected to slow during the period of 2011 to 2020. That’s because fuel-switching will decrease as consumers find the cost of energy rises, it added. This was coupled with a likely decline in oil consumption of 0.2 million barrels a day during the five-year period. The drop in demand was expected to be driven by shifts in the demand for oil products. Economic uncertainty in Europe meant that it was unlikely that there would be much appetite for expanding supply from OPEC countries during this time, although a recovery in demand might stimulate more investment in the US shale oil industry, it added. “Non-OPEC supply will mostly be met by US tight oil, in particular from Eagle Ford and Permian,” it said. “While the decline in North Sea oil production will be modest, the increase in production from other major non-OPEC producers will be slow and limited, in particular from Mexico and Russia.” The global oil market has been characterised by volatility as a result of “tensions and uncertainty” which have dominated the Middle East region, it said. It cited a recent attempt to drive up the price of oil and an “unprecedented” spike in oil prices during 2011. “This volatility is a new feature of the market, especially in Opec countries, in particular Opec producers’ countries have become ungovernable,” it said. Opec's members had made good progress towards increasing crude oil production for the year 2015. That was even before assuming its new policy decision, which comes into effect on 1 January 2016. A total of 28 out of 30 members of Opec had already announced their production targets for the period. This indicates that almost a quarter of the world’s oil supply will come from OPEC. But what does the production freeze mean for consumers? And what is its impact on the global oil price? “By not increasing production after March, Opec has changed its behaviour, so they have raised expectations regarding its ability to increase output. They want to change people’s perception of them from “price-setters” to “enforcers”. “It’s likely that production will remain steady in the first half of 2016,” she said. “However, if Opec meets this production level, the price of oil will rise by more than it does now. In the second half of the year, production will rise to around 33 million barrels a day,” she said. But that would be good news for the oil producers, she said. “Oil producers would be glad because they would be able to pump their oil without much loss of output,” she said. Krausz said: “But a small group of countries (around Saudi Arabia) have had a problem with production. But not everybody is happy with the idea of rising oil prices, so the Opec announcement this time is the news that might change that.” “There are three elements that could affect the oil price. One is demand from non-OPEC, two is supply from OPEC. If demand is a problem, demand will go down and if Opec supplies less, then oil prices go down,” she said. “If demand goes down and supply falls, oil price could go up, but not that much,” said Krausz. “It is difficult to think of a situation where the oil price is going to be too high for long enough for Iran and Venezuela to recover. So if Opec holds to this agreement, consumers will get cheaper oil than they would if supply went up,” she added. “There is too much demand and too little supply to set the price at $75 (a barrel). So, the production freeze is likely to hold,” she said.