July 16, 2007 --
London-Oil producer group OPEC warned on July 16 that ongoing
tightness in the downstream sector would continue to support
refined product prices and maintain the upward pressure on world
oil prices next year despite what it called a "healthy" supply
of crude.
It said projected growth of 1 million b/d in world refining
capacity in 2008 -- most of which will not come on line until
the latter part of the year -- was insufficient to meet even the
minimim projection for oil demand growth.
"Overall, the outlook for the oil market in 2008 is shaping
up to be quite similar to the current year, with continued
tightness in the downstream supporting high product prices and
frequent refinery outages exerting further upward pressure,
despite the healthy crude oil market," the group said in its
Monthly Oil Market Report for July.
OPEC sees demand for its own crude at 30.78 million b/d this
year, 220,000 b/d higher than its previous estimate, mainly
because it now believes oil supply from non-OPEC producers will
be significantly lower than previously forecast.
For the third and fourth quarters of this year, OPEC
estimates the call on its crude at 30.79 mil b/d and 31.13 mil
b/d respectively, some 810,000 b/d and 1.14 mil b/d above its
June output level which it estimated at 29.98 million b/d.
OPEC has dismissed calls from the International Energy Agency
to increase production now ahead of the winter, top officials
from the cartel saying last week that there was no shortage of
crude and that if OPEC were to push out more crude it would
simply go straight into storage which is already at high levels.
OPEC sees no shortage of
crude
"High oil prices, which we are now witnessing, are not a
consequence of insufficient crude supplies," OPEC Secretary
General Abdalla el-Badri said in a statement released July 12,
attributing current price levels to inadequate refinery
capacity, ongoing problems in US refineries, geopolitics and
increased futures market speculation.
"Inventory data continues to demonstrate that crude stocks
are ample. US crude stocks are now at nine-year highs while OECD
stocks are healthy, and are above their five-year average,"
Badri said.
North Sea Brent crude traded as high as $78.40/barrel on July
16, closing in on the $78.65/b record set last August.
In its first projections for 2008, meanwhile, OPEC is
forecasting the call on its own crude at 30.71 million b/d,
70,000 b/d lower than its forecast for the 2007 estimated call.
In 2008, world oil demand is seen growing by 1.35 million b/d
to 86.94 million b/d while non-OPEC supply is forecast to grow
by 1 million b/d to 51.42 million b/d.
OPEC natural gas liquids and OPEC "non-conventionals" are
seen averaging 4.39 million b/d this year, 50,000 b/d lower than
the previous estimate, and at 4.8 million b/d in 2008.
"For next year," OPEC said, "risks to the forecast could
impact world oil demand growth by around 150,000 b/d in either
direction. Oil demand in the OECD countries may turn out to be
weaker than expected due to the impact of higher gasoline prices
and stronger price elasticity. A continuation of the recent
pattern of warm winters in the Northern Hemisphere could further
dampen demand while an extremely cold weather poses an upward
risk."
The International Energy Agency on July 13 said tightness in
the global oil market could ease marginally next year as new
supply capacity and refining upgrades come on stream, but warned
that the the second half of this year could see the market
"oscillate uncomfortably" between sharp draws in consumer
inventories if OPEC continues to restrain output or a reduction
in surplus capacity if the cartel boosts output in line with
rising demand for its crude.
IEA sees possible supply
crunch
The IEA had already warned a few days earlier that a possible
supply crunch could occur by 2012, when OPEC's "effective" spare
capacity is seen "declining to minimal levels" of as little as
1.55 million b/d from almost 3 million b/d in mid-2007.
The IEA estimates current notional spare capacity within OPEC
at around 3.9 million b/d as a consequence of supply cuts
implemented since late last year. Excluding Indonesia, Iraq,
Venezuela and Nigeria, however, it estimates OPEC's "effective"
spare capacity as being closer to 2.8 million b/d.
The agency said its analysis suggested "a sharp rise in the
requirement for OPEC crude between a second quarter low point of
some 30 million b/d and nearer 33 million b/d by the fourth
quarter" of this year.
OPEC is next scheduled to meet on September 11 in Vienna. At
its last meeting in March, the group agreed to maintain 1.7
million b/d in output curbs agreed late last year.
