In its monthly report for November, OPEC predicted a slight rise in global oil demand for 2010, citing as a cause the world’s economic recovery and, in particular, growth in emerging Asian economies including China and India,

according to an Oil & Gas Journal article published on Wednesday.
OPEC’s report is in step with recent forecasts released by the
International Energy Agency (IEA) and the Energy Information
Administration (EIA), both of which predict increased demand and higher
oil prices in 2010, due in large part to a revived economy.

According to OPEC’s forecast, global oil demand will reach 85.07
million barrels a day in 2010, an increase of 0.9 percent, or 0.8
million more barrels a day, over this year. Specifically, OPEC predicts
that demand will increase 3.7 percent in China and 3.34 percent in the
Middle East, while dropping 1.25 percent in Western Europe. These
estimates fall just short of the IEA’s monthly outlook, which sees
crude demand in 2010 reaching 86.1 million barrels a day, an increase
of 1.7 percent, or 1.4 million more barrels a day, and driven by a 3.6
percent surge in demand from developing countries.

It is OPEC’s belief that the world economy will continue its recovery,
growing by 2.9 percent in 2010 after a contraction of 1.1 percent in
2009. China—one of the world’s most voracious oil consumers—is expected
to grow 8 percent and 8.5 percent in 2009 and 2010, respectively. If
economic growth and recovery lead to increased demand for oil (as OPEC
predicts), then the price of oil will likely go up. The EIA forecasts
that US crude oil will cost an average of $78.13 a barrel in 2010, up
from a previous estimate of $72.42. Accordingly, by December 2010 the
price of oil could hit $81 a barrel, “assuming US and world economic
conditions continue to improve.”

Still, OPEC seems hesitant to paint a rosy picture of the oil market;
rather, its predictions are full of cautious language, like those of
the IEA, which stated this month that despite the fact that “the pace
of demand contraction is clearly easing, the outlook for 2010 is still
fraught with uncertainty.” In its report, OPEC suggests that world oil
demand is unlikely to return to pre-crisis levels in the near future,
warning that a sustained increase in the price of oil could hurt crude
demand, especially given the shaky economy. This admonition has been
stated by economists like Nouriel Roubini, who worries that inflated
oil prices could hinder economic recovery.

Of course, there is also the matter of fuel distillates. According to
OPEC’s report, despite a drop of 19.4 million barrels in October, US
commercial distillate stocks are still abnormally high. Thus, “while
a cold winter may provide support for product markets and encourage
refiners to increase runs in the coming months, excessive levels of
distillate stocks could further constrain refinery operations,
impacting crude stock movements.”

Furthermore, OPEC’s analysis—which is based on the principles of supply
and demand—may be inaccurate if, as some analysts have argued, the
price of oil is currently more strongly affected by forces of the
financial market. According to Daniel Yergin, for instance, “Oil prices
today do not reflect the world’s supply and demand fundamentals.”
Rather, it is the weakness of the dollar and an overriding faith in
economic recovery that is pushing the price of oil up to $80 barrel.
This theory—recently espoused by both Roubini and Exxon CEO Rex
Tillerson—calls into question predictions made by OPEC and other groups
like the IEA and EIA.

Source: Oil and Gas Journal

Search to find what you want

• Oil falls below $ 81 in Asian trade

    World oil prices extended falls in Asian trade Monday mainly on concerns over energy demand following mixed economic reports. Light sweet crude for April delivery was seen trading at $ 80.78 a barrel at 11.30 a.m Singapore time while Brent crude was at $ 79.62 a barrel at the same

• Oil falls below $ 81 in Asian trade

    World oil prices extended falls in Asian trade Monday mainly on concerns over energy demand following mixed economic reports. Light sweet crude for April delivery was seen trading at $ 80.78 a barrel at 11.30 a.m Singapore time while Brent crude was at $ 79.62 a barrel at the same

• Iran expects rise in prices and demand for oil

    World oil demand will increase by 1.25 million barrel per day in the second half of 2010. It will lead to higher prices for raw materials, Iran’s representative to OPEC Mohammad Ali Khatibi forecasts

• Tillerson Says OPEC discipline undermines Amid Rising

    The Organization of Petroleum Exporting Countries, source of 40 percent of the world’s oil, has slipped further away from self-imposed production limits amid rising crude prices, Exxon Mobil Corp. Chief Executive Officer Rex Tillerson said. The cartel had “been extraordinarily good” at adhering to reductions agreed to a year ago, Tillerson

• IEA Raises 2009, 2010 oil demand forecast on China

    The International Energy Agency raised its global oil demand forecasts for this year and next, citing accelerating industrial activity in China, the world’s fastest-growing consumer of crude. The world will need an average of 85.25 million barrels of oil a day next year, 70,000 barrels a day more than previously estimated,

• OPEC to keep oil supplies unchanged: Algeria

    OPEC will keep supply unchanged when it meets on Tuesday in Angola, Algeria’s Energy Minister Chakib Khelil said on Sunday. “There will be no change in OPEC supply of crude oil. OPEC will not reduce supply and it will not increase supply,” Khelil told reporters

• Iran welcomes OPEC output u0026quot Compliance as

    OPEC members achieved a 66 percent compliance last year with agreed crude output targets, a senior Iranian oil official was quoted as saying on Sunday, describing it as a “success”. The producer group decided at a Dec. 22 meeting in Angola to keep its output policy unchanged, but faces a

• Iran says OPEC ceiling remains

    Iran’s Opec governor Mohammad Ali Khatibi said the oil cartel will not consider any changes to its crude output ceiling increase given the high levels of oil inventory in consuming countries. “Because oil has been stored in various parts of the world, Opec will not discuss its ceiling cut in its

• Iran sees no reason for OPEC to change output

    Most OPEC members believe it is too early to decide on output changes as stockpiles remain high. Iran’s representative to the Organization of Petroleum Exporting Countries (OPEC) says there is no valid justification for the group to change its oil production targets

• Kuwait says OPEC output change unlikely, given that oil prices acceptable

    A Kuwaiti OPEC delegate has said the cartel is likely to keep output targets steady when ministers of OPEC members meet next week as the current oil prices are acceptable, the Kuwait Times reported Thursday. Members of the Organization of Petroleum Exporting Countries (OPEC) saw current oil prices as acceptable at

• OPEC

    The decision of the Organisation of Petroleum Exporting Countries (Opec) to keep oil production quotas unchanged was influenced by the view that any tinkering with members’ production quotas at this stage would upset the world’s fragile economic growth and lead to demand destruction, experts tracking international oil markets told Gulf

• OPEC weekly oil price reached the highest point this year

    The weekly average oil price of the Organization of Petroleum Exporting Countries (OPEC) reached 72.21U.S. dollars per barrel last week, the highest point of this year, OPEC said Monday. After hovering for six weeks, OPEC weekly average oil price exceeded 70 dollars to 72.21 dollars. In addition, it also registered the largest weekly

• Kuwait, Saudi-98 pct in conformity with the OPEC cuts

    Core Gulf Arab OPEC members Saudi Arabia and Kuwait are delivering 98 percent of the crude output cuts they have pledged under OPEC deals, Kuwait’s oil minister was reported as saying by state news agency KUNA. The United Arab Emirates was at around 99 percent compliant with its pledges to curb

• Ecuador says no need for OPEC output change of policy

    World oil prices should stay in a range between $70 and $80 this year and OPEC has no need to change output policy at its March meeting, Ecuador’s minister for oil policy Germanico Pinto said Tuesday. Ecuador has the rotating presidency of OPEC this year. Asked by Reuters if he

• The demand for OPEC oil-drop in May 2010 on weak economy

    Demand for OPEC crude may drop by 100,000 barrels a day this year as stockpiles are higher than the five-year average and the global economy is weak, the United Arab Emirates oil minister said. Demand for crude produced by the Organization of Petroleum Exporting Countries could drop this year after