Oil demand in wealthy countries has not improved much and the patchy state of global recovery could prompt OPEC to keep output steady at its next meeting, the International Energy Agency (IEA) said on Tuesday.

High distillate stocks in the Organization for Economic Cooperation and
Development, the group of 30 rich nations, underscored the sluggish
rebound in those economies, since diesel is a key indicator of
industrial activity, IEA executive director Nobuo Tanaka said.

“We are concerned that economic recovery expectations are very high.
While that is true in China and India, in OECD countries like Europe
and Japan, we have not seen much of an actual recovery in oil demand,”
Tanaka told Reuters on the sidelines of an energyconference in the
city-state.

As a result, the high oil and fuel stockpiles could stay OPEC’s hand, he added.

“OECD inventories are very high, and OPEC’s concern is the global
economic recovery, so if the economies recover in a robust manner, they
will have to produce more. If not, just simply adding to the stock
levels does not make any sense.”

The Organization of the Petroleum Exporting Countries will meet in
Luanda, Angola on December 22 to decide on its production policy, with
most members saying so far that it was too early to decide on any
changes, as stockpiles remain high, though prices have risen close to
$80 a barrel.

The producer group has kept official production targets unchanged at
meetings this year, after it agreed to curb output by 4.2 million
barrels per day (bpd) last year.

Kuwait’s oil minister Sheikh Ahmad al-Abdullah al-Sabah said on Tuesday
he expected OPEC to keep production targets unchanged at its December
meet, but would like to see better compliance from members.

WEAK DOLLAR A FACTOR

Ship brokers ICAP said oil products now stored in floating vessels
globally have risen to 90.3 million barrels, up nearly 15 million
barrels from an earlier estimate at end-October, and might rise by
another 6.5 million barrels by year-end.

Oil has risen to $78.70 on Tuesday from a low of less than $33 in
December, though it is still about 47 percent below a high of more than
$147 hit in July last year. One reason for oil’s climb is the soft U.S.
dollar, which on Tuesday held near 15-month lows against a currency
basket.

Tanaka said the weakening dollar was “certainly one element of higher
oil prices,” but declined to comment if $80 a barrel was too high.

“It all depends on the level of economic growth. What is a comfortable
level is very difficult to say. But if prices rise too high, too fast,
it could undermine the economic recovery.”

When asked if oil should be priced off a basket of currencies or even
the euro, instead of the dollar, to provide more stability, Tanaka
said:?

Source: Reuters

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