OPEC sees higher demand for its crude in Q3, Q4

OPEC sees higher demand for its crude in Q3, Q4

London (Platts)--16Jun2005


OPEC on Jun 16 raised its estimate for demand for its crude in the second half
of this year, predicting that by the fourth quarter of 2005 it would need to
be pumping 30.61-mil b/d to keep world markets in balance. 

A day after OPEC ministers met in Vienna and agreed to raise their combined
10-member crude output ceiling to 28-mil b/d from July, the organization
released its latest monthly oil market report showing that the same 10
countries pumped an average of 28.217-mil b/d in May. Including Iraq, which is
not part of the quota system, OPEC produced 30.02-mil b/d last month, up from
29.92-mil b/d in April, OPEC said. OPEC's estimates of its output are based on
secondary sources. The largest month-on-month increase in output was from
Saudi Arabia, which boosted production to 9.54-mil b/d in May from 9.438-mil
b/d in April, according to the OPEC figures.

OPEC left its outright estimate for world oil demand this year unchanged at
83.94-mil b/d. But as a result of increased estimates of consumption in 2004,
the year-on-year rise in demand is now expected to be 1.77-mil b/d, or 2.2%,
down from a previous forecast of 1.82-mil b/d. OPEC expects non-OPEC supply to
average 54.78-mil b/d in 2005, leaving the "call" on OPEC crude at an average
of 29.16-mil b/d. 

Although the average demand level this year was not altered, the cartel made a
number of adjustments to the consumption figures for individual quarters of
2005. Largely as a result of those changes, OPEC raised the call on its crude
for the third quarter of 2005 to 29.08-mil b/d from a previous forecast of
28.93-mil b/d. The corresponding figure for the fourth quarter was raised from
30.53-mil b/d to 30.61-mil b/d, putting it above actual current production.

Demand in the fourth quarter is expected to average a record 85.91-mil b/d,
OPEC said. "Given the implications to the market of such a level of demand in
the last quarter of the year, in terms of supply and the balance, it is
extremely important that this situation be closely monitored," it said. The
report also echoed concerns voiced by ministers in Vienna this week that
current high oil prices reflected a shortage of refining capacity more than a
fundamental shortage of crude. 

"OPEC's considerable efforts (to stabilize the market) need to be complemented
by immediate and sizeable investments in the refining sector, especially in
conversion capacity, which have persistently lagged behind market
requirements," OPEC said. "This challenge in the downstream is a
responsibility shared by all parties, including the industry and consuming
governments. If left unresolved, it will continue to overshadow the timely
actions being carried out on the upstream side and further exacerbate oil
price volatility," it added.

This story was originally published in Platts Global Alert
http://www.globalalert.platts.com

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