The U.S. government and OPEC on Wednesday took divergent views on the changing outlook for global oil demand this year, with the Energy Information Administration boosting its growth forecast while OPEC trimmed its downbeat prediction due to persistent U.S. economic weakness. Encouraged by rising consumption in China and other Asian nations, the U.S. government’ s energy analytical arm lifted its growth forecast by 120,000 barrels per day to 1.2 million bpd as global use rebounds following two years of decline. “ China’ s economic stimulus package continued to help push up both oil usage and economic growth,” the EIA report said.
But the Organization of Petroleum Exporting Countries (OPEC) took a grimmer view, citing a slower-than-expected recovery from recession as it revised down its growth forecast for the year by 10,000 bpd to 810,000 bpd, the weakest outlook of the three main agencies that issue forecasts. “ The slow pace of the recovery in the world economy in 2010 is putting pressure on oil demand,” the report from OPEC’ s Vienna headquarters said. “ Early assessment indicated that worse-than-expected U.S. oil demand might shave more than 100,000 bpd from the world oil demand growth forecast for 2010.” OPEC kept its oil output targets unchanged at a meeting in December, wrapping up a year of stable policy after making a record cut in its supplies in 2008 as recession eroded demand. The group meets again in March.
Both forecasts are less upbeat than the International Energy Agency’ s projection last month of world oil demand this year, which it said would rise by 1.44 million bpd to 86.3 million bpd in 2010. The IEA revises its monthly forecast Thursday. Peter Beutel, president of Cameron Hanover in New Canaan, Conn., said the new forecasts show “ we have a very uneven economic recovery,” as the Asian economies seem to be rebounding while U.S. and European economies continue to lag. “ Are we going to see China be the locomotive that eventually pulls U.S. growth out? Or are we going to see some of the European and American lagging growth start to cut into China growth?” he said.
Rising consumption in China and other emerging economies helped send crude oil prices to record highs near $150 US a barrel in July 2008. Prices plunged to below $33 a barrel in December of that year as the economic crisis squeezed demand in the United States and other developed economies. Expectations that an economic turnaround could bolster demand have pushed U.S. crude futures back over $73 a barrel. Analysts said the report suggested OPEC was more concerned for now about downside risks. “ The developments of the last weeks worries them (OPEC), in my opinion. There definitely haven’ t been positive signs recently and OPEC is looking at that more,” said Eugen Weinberg, oil analyst at Commerzbank in Frankfurt. “ The report shows supply has increased over the last weeks from OPEC and from the fundamental point of view it is difficult to see a positive picture for the oil market.”
Meanwhile, petroleum supplies are forecast to be tighter. The EIA narrowed the surplus in global oil supply compared with world demand to just 250,000 bpd for this year, down from a 440,000-bpd surplus in the agency’ s forecast last month. The smaller gap between supply and demand is due to expected higher global oil consumption and the EIA lowering its estimate for non-OPEC oil output in 2010 by 50,000 bpd, even though production will still rise by 430,000 bpd from 2009.
The EIA said apparent liquid fuels demand in China, the world’ s second biggest consumer, rose by 900,000 barrels in December, helping prompt the upward revision. OPEC raised the demand forecast for its crude this year by 160,000 bpd to 28.75 million bpd, although this was mainly due to reduced expectations for its natural gas liquids output. Tim Evans, energy analyst for Citi Futures Perspective, said forecasts for both OPEC and non-OPEC oil supplies are higher than a year ago. “ Here’ s where I’ m less bullish than many views out there, because demand is only growing slightly from a low level and supply is growing at a rate that at least keeps a balance in the market, which will leave inventories at high levels,” he said.
Author: Tom Doggett, Joe Brock
