OPEC could lose almost 8 percent of its oil market share in the next five years as the shale energy boom and other competing sources boost rival supply, offering the exporter group little benefit from rising world demand.
The Organization of Petroleum Exporting Countries has been slower than some to acknowledge the impact that hydraulic fracturing, or fracking, is having on supply. Earlier this year, it decided to carry out its own research into shale oil.
In its annual World Oil Outlook, OPEC said it expected global demand for its crude oil to average 29.2 million barrels per day in 2018, down 1.1 million from 2013, because of increasing supply outside the 12-member group.
Under another, upside supply scenario, OPEC sees an even larger drop in demand for OPEC crude to 28 million in 2018, 7.6 percent less than this year and 2 million below what it is currently producing.
"There is no shortage of oil and resources are plentiful," OPEC Secretary General Abdullah al-Badri said in the foreword to the report. "Increasing global oil demand is supported by an expanding diversity of supply sources."
OPEC, which holds 80 percent of the world's conventional oil reserves, wants prices to be around $100 a barrel which in nominal terms is almost four times their level a decade ago.
Higher prices have helped to make a wider range of supply commercially viable, including fracking, oil extraction from tar sands and conventional oil wells in more remote locations and in harder-to-tap reservoirs like ultra deep waters.
The U.S. shale boom has redrawn the landscape of oil trade. Nigeria and fellow OPEC member Algeria have felt the heat, losing ground in their most lucrative export market as U.S. output, once considered to have peaked, rises and approaches that of No.1 oil producer Russia.
Despite this, OPEC in its reference scenario is not worried about shale oil, saying output is expected to decline after 2020 citing challenges including a rapid output decline from wells, environmental concerns and rising costs.
But that scenario assumes shale oil has no impact outside North America and that decline actually occurs. So far, U.S. shale oil output has continued to grow, defying predictions that it would peak.
Shale is prompting interest and activity worldwide, including in OPEC's top oil producer Saudi Arabia which is preparing to use shale gas for power generation, and OPEC concedes shale oil could have a wider impact.
"In addition to the potential for a more rapid expansion of supply from North American tight oil, there are also additional tight oil resources in other non-OPEC countries, particularly Russia, Argentina and China," the report said.
Output of other crude oil and natural gas liquids could also prove stronger than expected in Brazil and Russia, it said.
Previous editions of the OPEC report saw no significant supply addition from shale oil although last year's acknowledged for the first time that the impact could be "significant."
While OPEC sees its market share under pressure, the long-term global demand for oil is benefiting from a healthier economic outlook.
In its reference scenario, OPEC forecasts world demand reaching 92.5 million by 2016, some 400,000 less than its forecast in last year's report.
By 2035, it sees consumption at 108.5 million, up 1.2 million from last year's report. Demand was 88.9 million in 2012.
Supply from countries outside OPEC is seen at 57.3 million by 2016, up from the 56.6 million expected in last year's report. It is seen reaching 58.6 million in 2018.
As well as shale, oil extracted from tar sands in Canada, crude from the Caspian and Latin America, and biofuels in Brazil and Europe are expected to provide growth.
In the face of sharply higher non-OPEC supply, OPEC would face a choice of cutting its own output to boost prices, or accepting a lower price to drive some of the more costly competing supplies out of business.
The report assumes OPEC's preferred measure of oil prices will remain at $110 a barrel to 2020 and rise to $160 by 2035, up $5 from last year's forecast.
OPEC has a target to produce 30 million and meets on Dec. 4 in Vienna to decide whether to adjust it. With oil holding above $100, a change is unlikely, OPEC delegates have said.
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