All net additions to take place in the non-OECD; will massively exceed expected demand growth of 2mbpd.

Didier Houssin, director, energy markets and security, at the International Energy Agency (IEA), says that net global refining capacity is expected to grow by 8.7mbpd by 2016, with the non-OECD countries accounting for all new growth. The capacity increase will outstrip global demand growth of around 2mbpd.

Speaking at an energy conference today in London, Houssin said that oil demand in the US and Europe is expected to fall by 0.3% and 0.3mbpd, respectively. US light oil is expected to grow from the 620,000bpd seen in 2011 to 1.7mbpd in 2016.

Iraqi oil production is expected to increase by just 250,000bpd in 2012, due to "continuing export constraints" but is predicted to grow to 4.4mbpd in 2016. Houssin notes that it actually declined by 40,000bpd in January to 2.65mbpd.

Oil demand from Japan's power sector could provide some upside potential with the "distinct possibility of no nuclear power generation after April" in the country. This could increase Japan's oil demand by 465,000bpd compared with a normal nuclear profile. The IEA says the sector could consume 320,000bpd of additional oil in 2012, up from the 280,000bpd seen in 2011.

Opec “effective” spare capacity is currently at 2.82mbpd, with Saudi Arabia accounting for an estimated 2.03mbpd. Around 1mbpd of global spare capacity is not suited to the market's needs and this is not included in effective spare capacity, Houssin says.

Saudi Arabia supplied 9.85mbpd in January and Houssin says he has been told by oil minister Ali al-Naimi that Saudi Arabia could quickly ramp up output to 11.4–11.8mbpd if required.

On the whole, the market has been slightly undersupplied and is tightening, Houssin says. The IEA expects the oil market to roughly be in balance by the spring, before tightening further in the second half of 2012. "A backwarded market does not encourage stock building," he says.

Houssin says that clean middle distillates could be a route to resisting competitive pressure.

When asked by GTForum as to how he expects the quality of the crude slate to evolve for OECD refiners, Houssin said that the increase in NGL and tight oil production in the US is expected to shift crude quality "overall in the right direction". As far as Opec is concerned, he said that it is going in a different direction but this is partly balanced by increasing NGL production.

When then asked if the loss of energy security and resilience from the closure of refineries in the EU was a price worth paying for economic efficiency, Houssin said that restructuring will have to take place, citing the growing mismatch between European gasoline and diesel demand and production. He sees declining US demand for European gasoline as a key issue for the industry. The growth of new refining capacity in Asia is likely to create new opportunities for EU consumers, Houssin says.

Isabelle Muller, secretary-general of the European Petroleum Industry Association (Europia), asked which refiners will benefit from the tight diesel market. In response, Houssin said that restructuring is likely to be supportive for the industry as it will support higher margins.

"Refineries with a high conversion capacity, those that have invested in upgrading [capacity] will probably benefit from that trend, while simple refineries will have a more difficult time," he says.