OPEC's cup brimming despite leakage
By Margaret McQuaile on October 14, 2009 9:43 AM
Steadily diminishing OPEC compliance with last December's 4.2 million
b/d output pact is turning out to be no big deal in light of rising
hopes that the world economy may finally be on the path to recovery.
The latest Platts estimates show total OPEC production in September at
28.83 million b/d and output from the 11 members bound by quotas at
26.33 million b/d, up 40,000 b/d and 90,000 b/d respectively from
August. OPEC's own estimates, derived from secondary sources, put the
September volumes even higher -- 28.9 million b/d for all 12 members,
including Iraq, and 26.42 million b/d for the OPEC-11, minus Iraq.
Following on from the International Monetary Fund's declaration at the
beginning of October that the world economy now appeared to be growing
again and that global activity was estimated to have risen by about 3%
during the second quarter after a 6.5% contraction in the first quarter,
the past week or so has seen energy forecasters revise their demand
projections upward.
On October 9, the International Energy Agency said it now reckoned world
oil demand would average 84.63 million b/d this year, 200,000 b/d more
than previously forecast. For the fourth quarter alone, the IEA has
hiked its demand estimate by 530,000 b/d to 85.2 million b/d. For 2010,
the IEA has raised its demand forecast by 350,000 b/d to 86.05 million
b/d, largely reversing the expected sharp fall in consumption this year.
But these more optimistic forecasts come with various caveats. The IMF
warned in its World Economic Outlook on October 1 that rising oil prices
still presented a risk to economic recovery and that temporary price
spikes could not be ruled out in the future, while the IEA made the
point that prompt demand for oil remained "in the doldrums."
OPEC itself, meanwhile, having referred to "the fragile state of the
global economic recovery" and "persistent challenges from weak
fundamentals" in its previous oil market report a month ago, admitted
October 13that the forecast for world oil demand this year was "not as
bad as previously expected."
The oil exporter club sees demand for its crude averaging 28.6 million
b/d this year, 100,000 b/d more than its forecast a month ago, and 28.4
million b/d in 2010, 300,000 b/d more than previously forecast.
On a quarterly basis, OPEC has raised its forecasts by 180,000 b/d for
the third quarter of this year and by 80,000 b/d for the fourth, to 28.8
million b/d and 29.25 million b/d respectively.
So far so good. But OPEC's forecasts see the call on its own crude
taking a 1.29 million b/d dive to 27.96 million b/d in the first quarter
of 2010 and falling by a further 470,000 b/d in the second quarter to
27.49 million b/d.
Saudi oil minister Ali Naimi, whose opinion tends to hold sway in OPEC
decision-making, told US broadcaster PBS late last month that he saw no
reason for OPEC not to rubber stamp its current agreement for the fourth
time this year when the group next meets on December 22 in Angola.
A big question, however, given rising OPEC production beyond official
levels and still brimming consumer inventories, is whether Mr Naimi will
at some point in the not-too-distant-future start thinking that a
decisive call for discipline may be necessary.
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