OPEC sees world oil demand slowing in 2012

  • Share via facebook
  • Tweet this
  • Bookmark and Share

World oil demand is likely to grow more slowly in 2012 because of a fragile global economy and deepening decline in consumption in Europe, the Organization of the Petroleum Exporting Countries said in its first forecast for next year.

Oil prices could draw some support from a lingering supply shortfall of more than 1 million bpd between the anticipated demand for OPEC crude and the amount pumped by the 12-member group, although increased output from top producer Saudi Arabia has narrowed the gap.

In its monthly report on Tuesday, OPEC predicted world oil consumption would rise by 1.32 million barrels per day (bpd) in 2012, slightly lower than the growth of 1.36 million bpd expected this year.

OPEC said the demand outlook was subject to much uncertainty and could contract further depending on factors such as the speed of Japan's recovery from this year's nuclear disaster and tsunami, as well as on the impact of oil prices on developed economies.

"Should higher international oil prices persist, or should further setbacks in the OECD economies occur, then it might impose a stronger reverse elasticity on oil demand, putting more weight on the downside risk," OPEC said.

"This risk might be translated into a reduction of current growth by 200,000 bpd."

OPEC is the first of the three most closely watched oil forecasters to update its supply and demand estimates this month. Its 2012 demand growth forecast is lower than that of the U.S. government's Energy Information Administration, which predicts a rise of 1.6 million bpd.

The EIA is scheduled to release its July report later on Tuesday while the International Energy Agency, adviser to the United States and 27 other industrialised countries, will do so on Wednesday.

Analysts are especially focused on the IEA's predictions.

"With prices at this level we can expect a strong impact on demand," said Christophe Barret, global oil analyst at Credit Agricole. "What I am waiting for is the IEA report tomorrow, that will be very important."

At a meeting in June, OPEC failed to reach agreement on a Saudi-led proposal to increase output even though the group's own economists forecast a supply gap in the second half of the year.

Saudi Arabia has since unilaterally added some 461,000 bpd to its production in June, compared with May, taking its output to 9.42 million bpd, according to secondary sources cited by the report.

As a result of the higher production, Tuesday's report implied the supply gap had narrowed to 1.25 mln bpd from 1.73 million bpd in June's report.

OPEC output as a whole rose by 520,000 bpd in June compared with May to 29.60 million bpd, the secondary sources found.

The report sees the need for OPEC crude to rise further next year to 30.3 million bpd from 30 million bpd in 2011.

In response to the failed OPEC meeting, the IEA, led by top oil consumer the United States, announced the release of 60 million barrels from emergency stockpiles late last month.

Some OPEC officials, notably from Iran, condemned the intervention and OPEC's report also implied criticism, saying it had not stifled speculation that exaggerated price moves.

"Speculative activity has continued to push prices beyond levels justified by fundamentals," the report said.

"The market reaction to the recent decision to release Strategic Petroleum Reserves provides a good example," it continued, as prices had initially fallen sharply and then recovered.

Brent crude was trading above $116 a barrel on Tuesday, higher than before the announcement of the IEA's emergency reserves release.

Related:
Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

Enter the words above: Enter the numbers you hear:

All comments are subject to approval before appearing

Further reading

Features & Analysis
Petroleum producers shift attention from Middle East: Kemp

Petroleum producers shift attention from Middle East: Kemp

Following four decades of war, sanctions, nationalisation and...

1
Back in business

Back in business

Iran’s tankers are back on the oceans as sanctions on the Islamic...

A new future for Saudi Arabia?

A new future for Saudi Arabia?

The vast Wadd Al Shimal phosphate mine in the north of Saudi...

Most Discussed