Same numbers, different opinions

An abandoned oil well head leaking crude oil, in Nigeria. Supply disruptions in West Africa are having an impact on prices. (LIONEL HEALING/AFP/Getty Images)

OPEC and the International Energy Agency (IEA) take perpetually diverse views of the world oil market. Each one produces an over-weight monthly report, quoting figures of supply and demand to suit their standpoints.

Numbers abound in these reports. OPEC talks down rising prices. The IEA talks up falling stocks. For instance, OPEC quotes a price from its ‘reference basket', which always runs lower than headline numbers. At the time of writing the OPEC reference sits at US $66.74, versus the Brent Blend price of US $71.46.

Despite its lower average price, the OPEC basket does mirror the movement seen in spot prices. The May edition of the OPEC monthly report referred to an "eight-month high in April on concern over summer fuel supplies and worries over potential supply disruptions amid geopolitical developments. The basket rose US $4.92 or 8.4% in April to stand at US $63.39, the third monthly rise and 25% higher than in January. In the first half of May, the basket resumed the downward trend on the perception of lower demand amid some Asian refineries still on seasonal maintenance. However, higher demand forecasts and supply disruptions from West Africa kept prices in check as the OPEC reference basket eased to US $63.68 on 14 May."

This was before the spike that saw a rise to over US $70 a few days later. Influencing factors here were the ongoing threat of sanctions against Iran, plus the increasing unrest in the Nigerian delta, where there have now been 25 foreign hostages taken captive from oil installations.

Unplanned refinery outages, combined with the annual maintenance season - which has suffered from scheduling delays - have put pressure on gasoline supplies. The IEA's oil market report said "this implies, with demand increasing in June, that there will be further tightening of product stocks. Refinery runs, and therefore crude demand, should rise sharply in July as refiners seek to meet peak summer demand."

In the language of OPEC "this situation lifted refinery margins significantly across the globe. With the approaching end of the refinery maintenance schedule in the Atlantic Basin, product market sentiment may soften slightly over the next weeks, but is likely to remain supportive to crude prices, as US refiners might not be able to raise throughput level sharply in the short term."

Over all OPEC saw world oil demand as being "lower in April than in the previous month, although demand growth was the strongest in North America. Non-OECD oil demand grew but not as much as in the OECD countries ... Booming economic activities helped boost oil demand in both the Middle East and China, with year-on-year increases of 0.3 million barrels per day (bpd) and 0.4 million bpd respectively."

The IEA acknowledged the decrease in demand, but maintains that overall world demand for oil products "is expected to rise by 1.8% in 2007, or 1.5 million bpd."

It concludes that the OECD stock draw over the past six months has been unusually high and that gasoline stocks are tight. It also contends that these stocks may tighten further during June, unless refinery capacity increases more than forecast. IEA analysts see crude stocks tightening if OPEC production stays at current levels and "anticipate a thirsty market in the months ahead."

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