By Martin Morris
Downside risks remain, despite improvement in sentiment recently seen in financial and commodities markets.
In a feature in its latest monthly report OPEC expects world oil demand to grow by 500,000 barrels a day (0.5 mb/d) in 2010, hitting 84.3 million barrels a day (84.3 mb/d). This compares to average growth of 1.6 mb/d in the five-year period prior to the global recession in 2008. Demand for its own oil, however, is anticipated to shrink for a third year in 2010, by 0.4mb/d to 28.1 m/bd.
The bulk of the recovery in world oil demand is expected to be seen in H2 2010 when the global economic rebound strengthens. Growth is expected to come mostly from the non-OECD, mainly China, India, the Middle East and Latin America.
US oil demand will remain as a wild card in 2010, given the uncertainty about the pace of the economic recovery there.
In a statement the organisation said: ''The oil market this year has been strongly impacted by the financial crisis, global recession and resulting erosion in world oil demand.
''These factors have substantially magnified the uncertainties affecting the market and contributed significantly to volatility.
''They have also made projecting oil market developments very challenging, as the current uncertainties are expected to continue to cast a shadow over the market in 2010.''
It added: ''Risks remain predominantly on the downside, despite the recent improved sentiment in forward-looking financial and commodity markets.
''In the US, stretched households will require time to readjust their balance sheets, amidst rising unemployment and sharply diminished wealth, implying modest growth in consumer spending.'' The report added that oil prices, taxes, and the removal of retail price subsidies will also impact demand and could lead to further downward revisions.
Should the US experience a stronger and more rapid economic recovery than currently expected, then oil demand could see higher growth, OPEC noted.
Non-OPEC supply meanwhile is projected to increase by 0.3 mb/d to just under 51 mb/d in 2010. Brazil is expected to be the largest contributor to the growth followed by the US.
Contributions will also come from Azerbaijan, Kazakhstan, Canada, China, and India. Mexico and the North Sea are both expected to continue declining in 2010.
Given the projected outlook, the report says increasing OPEC spare capacity and growing idle refining capacity should be sufficient to offset any sudden surge in demand or supply disruption in either crude or products.
This reduces the likelihood of fundamental factors exerting strong upward pressure on prices in 2010.
If the US doesn't recover, the rest of the world will be behind it...unrecovered. Remember the US is the number one economy with 14$ trillion, Japan second with roughly $4-5 trillion, and China third with $3 to 4 trillion USD. This was in peak 2008, adjust in terms of contraction for 2009. Without the US consumer buying China's "widgets", there is no Chinese economy. With rampant continued high unemployment in the US, Europe, and the rest of the world, where will the buyers come for exported products when they are unemployed? Enough with the spin control! Without jobs there is zero cash..thus zero growth and actual contraction of all global GDPs. Take into consideration that major blue chip companies WILL NOT rehire the employees that they have terminated for many, many, many years to come. The small stock rally globally is due to goods or profits made by a corporation due to the recent terminations of a large portion of their workforce. Thus a considerable smaller workforce, putting out the same output equals higher profits. It has taken over a decade of greed, theft and deregulation of financial industrys by the US and Europe that brought the world to it's knees. Don't think for a moment were coming out of this in a year or even 5 years. The smaller countries, in their position in the global economies are no better, in terms of greed...eg. Brazil, Russia, India, Middle East. Greed, lack of transparency, theft, lack of ethics, does not discriminate based on religion, color, or nationality. Money brings out the worst in everyone..especially greedy money. I've seen more than my fair share in New York, London, Paris, Dubai, Australia, South Africa, Hong Kong, China...some get named as cities others as countries. I'm going to end this with..OPEC can want and dream what they want..the fact is the world economies are heading south..very quickly! There isn't sustainable demand that was there at the peak of the market in 2007 and 2008, that will warrant higher oil prices. The world is in the Intensive Care Unit and the outcome is extremely GRIM. Don't listen to the individuals that got us into this mess. Start questioning all of them..especially the ones that want to be in authority. Start thinking for yourselves and "over analyze" every transaction in terms of safety, transparency, and worth. The crooks and scammers are still there in front of you..they just have a new look..look closely and penetrate through their facades. Don't give in without a fight. Remember cash is KING. Keep it in the bank and make a small safe return on investment. don't fall into the web of greed...look at what's happened to the greedy investors as of today... Good health to all and cheers to all!!!