At 1.36 million b/d, still well
above IEA estimate
OPEC on June 19 shaved its forecast of world oil demand growth in
2006 to 1.36 million b/d from the 1.38 million b/d estimated in May,
and well below the 1.6 million b/d forecast in July last year. Total
world oil demand is forecast at 84.63 million b/d, up from a revised
estimate of 83.27 million b/d in 2005.
OPEC's estimate of world oil demand growth in 2006 is higher than
last week's 1.24 million b/d forecast from the International Energy
Agency, which sees total world oil demand this year at 84.9 million
b/d.
The cartel's Monthly Oil Market Report for June said that while
the world economy's strong performance in the first quarter provided
further evidence that high oil prices were having a limited impact
on the strength of the economic rebound since 2003, this was not
being reflected by commensurate growth in oil demand. It said the
decision by ministers earlier this month in Caracas to keep the
official crude production ceiling at 28 million b/d reflected OPEC's
concern about the impact of continued high oil prices.
"By refraining from a production cut that would have been
indicated by purely fundamental considerations, OPEC members
continue to make available to the market an extra supply buffer to
help counteract high oil prices and price volatility, and to
reassure markets that supplies would be sufficient to deal with any
eventuality in the coming months, be it a rise in demand or a supply
disruption caused by natural disasters during the hurricane season,"
the report said.
Price impact
The report, published by OPEC's Vienna secretariat, said that
while the biggest share of increased world oil demand growth was
mainly in the developing countries—to which 43% of this year's
demand growth is attributed, "signs indicate an easing in oil
demand, partly due to the high prices."
The removal of oil product subsidies in some Asian countries,
such as Indonesia, Malaysia and the Philippines, has had a
noticeable effect on demand in the short term, OPEC said, adding:
"It remains to be seen if the shock will diminish once prices have
stabilized and consumers and firms adjust to the higher price
levels."
In the US, unusually warm winter weather in the first quarter
"diminished the positive impact of healthy economomic growth" and
reduced oil demand by 1.3% in the first quarter, although
preliminary US data showed that demand recovered in April and May.
"While higher prices may have played a dampening role on demand, the
size of the price response is difficult to gauge," OPEC said.
Tightness in the US gasoline market ahead of the driving season
now appeared to be easing, OPEC said, noting that rising gasoline
output and higher imports had sent stocks surging by 10 million
barrels since late April. "On the whole, given the stabilization of
gasoline prices and the continued economic expansion, the recent
recovery in demand is expected to extend over the coming months,"
OPEC said.
In China, oil demand is seen increasing by 500,000 b/d to average
just over 7 million b/d this year. "An unusually hot summer and
potential power shortages will positively affect oil demand," OPEC
said, with support also from a manufacturing boom, low inflation,
higher car sales and "the expected filling of the new Chinese
strategic petroleum reserves."
The cartel also trimmed its forecast of non-OPEC output in 2006
by some 80,000 b/d to 51.4 million b/d from 51.48 million b/d,
higher than the IEA's forecast of 51.2 million b/d. It now sees
non-OPEC supply growing by 1.26 million b/d and not the 1.34 million
b/d of the previous report.
It said the adjustment reflected lower-than-expected production
growth from Canada, Australia, Angola and Mauritania "due to
unexpected technical issues affecting the startup or production of
some key projects." These adjustments, however, were partly offset
by upward revisions in other countries, "particularly Argentina,
Russia and Kazakhstan." Furthermore, it said, "growth is expected to
accelerate rapidly from June onwards, consistent with previous
estimates."
Non-OPEC supply, the report noted, appeared to have exceeded 51
million b/d in May for the first time. The forecast for Russian oil
supply in 2006 is adjusted upward by 10,000 b/d to 9.6 million b/d
this year, up 200,000 b/d from 2005.
OPEC raised its forecast of the "call" on its own crude this year
by 110,000 b/d to 28.73 million b/d from 28.62 million b/d, well
above what it reckons its members produced in May. Using media
"secondary sources," it estimated its own 11-member crude output in
May at 29.479 million b/d, down 105,000 b/d from a revised April
figure of 29.584 million b/d. Excluding Iraq, it estimated
production from the 10 members with quotas at 27.555 million b/d,
down 70,000 b/d from the revised April figure of 27.625 million b/d
and 445,000 b/d below the notional 28 million b/d ceiling.
In its May report, OPEC estimated total OPEC output at 29.798
million b/d and OPEC-10 output at 27.841 million b/d. The report
revised April estimates for a number of member countries, but the
biggest revision was in Saudi Arabian output, which was originally
estimated at 9.413 million b/d but has been revised downward by
219,000 b/d to 9.194 million b/d.
Created: June 19, 2006
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