UPDATE 2-U.S. oil boom to erode OPEC market share in 2014-IEA

Thu Jul 11, 2013 11:32am BST

* Oil demand growth seen strongest since 2010

* Need for OPEC oil in 2014 to be 1 mbpd below output now

* Says 2014 outlook "should give oil bulls cause for alarm" (Adds video link, comparisons with EIA, OPEC reports)

By Dmitry Zhdannikov

LONDON, July 11 (Reuters) - The North American shale oil boom could spur the biggest rise in non-OPEC supply growth in decades next year, helping meet strong global demand and eroding the market share of OPEC countries, the International Energy Agency (IEA) said on Thursday.

Shale oil and gas is already transforming the global energy market, notably by providing cheap supplies to the U.S. economy and lessening its dependence on imports.

Even though global oil demand growth in 2014 will rise to its strongest level since 2010, supply will remain quite comfortable, meaning oil prices should avoid steep spikes, the IEA, the energy adviser to industrialised countries said in its monthly report.

"The 2014 outlook... should give oil bulls some cause for alarm. NonOPEC supply growth looks on track to hit a 20year record next year, surpassing the 1.3 million bpd high reached in 2002," the IEA said.

While demand growth is also forecast to gain momentum, rising to 1.2 million barrels per day (bpd) in 2014 from 0.930 million bpd in 2013, it will still fall short of forecast nonOPEC supply growth.

As a result, the need for OPEC oil will decline. The IEA said the "call" on OPEC crude is set to ease in 2014 to 29.4 million bpd from 29.6 million bpd this year and versus current OPEC production of 30.61 million bpd.

The picture painted by the IEA represents a dramatic change in patterns seen in recent decades when the world was expected to be increasingly reliant on OPEC's oil with supplies from other producers declining or remaining stagnant.

OPEC itself said on Wednesday that 2014 incremental demand will be covered by non-OPEC supplies.

Rising shale output will make it harder for the 12-member group to keep its own output at high rates without risking a drop in prices below $100 a barrel, its preferred level.

NON-OPEC SURGE

In 2014, the IEA expects North American supply to grow by close to 1 million bpd and other countries including Brazil and Kazakhstan to also produce more.

Major presalt projects in Brazil, the Kashagan field in Kazakhstan, West Chirag in Azerbaijan, and new fields in the North Sea are expected to offset declining production elsewhere.

"Production could prove even higher than forecast in Russia, the United States, Canada, and Brazil, especially if prices remain at or above current levels," the IEA said. For Reuters TV interview with the IEA's Antoine Halff reut.rs/1dlFrSp

On the demand side, China is forecast to remain the main engine of demand growth in 2014 adding 385,000 bpd, followed by the rest of nonOECD Asia adding 325,000 bpd and the Middle East, where demand should rise by 225,000 bpd.

"While demand in the OECD region is expected to contract, it will do so at a much slower pace than has been the case in the last few years since the 2008 financial crisis, edging down by 0.4 percent in 2014 compared to the 0.8 percent drop of 2013."

Top oil consumer the United States will see a modest 0.1 percent drop in demand to 18.6 million bpd in 2014, as efficiency gains continue to dampen the U.S. demand outlook.

In China, the world's No.2 oil user, the IEA sees growth of 3.9 percent, taking 2014 consumption to around 10.3 million bpd.

U.S. government forecasts 2014 global demand growth similar to the IEA. (Editing by Jason Neely and James Jukwey)

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