OPEC cuts estimated call on its own crude
By Margaret McQuaile,
Richard Swann in London
January 17, 2013 - OPEC has lowered its estimate of the demand for crude
oil produced by its member countries this year to 29.65 million b/d,
100,000 b/d lower than its previous forecast a month ago and some
715,000 b/d below estimated December output of 30.365 million b/d.
But the difference between actual production, as derived from the
secondary sources OPEC uses to monitor its output, and the forecast call
on OPEC crude is considerably starker at more than 1 million b/d when
compared with the 29.27 million b/d projection for the current quarter
of 2013.
The cut in the call on OPEC, published in the organization's latest
monthly oil market report, stems largely from an increase in the
forecast for supply next year from non-OPEC countries.
OPEC now expects non-OPEC supply to reach 53.92 million b/d in 2013, up
930,000 b/d from this year's estimated 52.98 million b/d and 90,000 b/d
higher than the estimate in the previous monthly report.
The US alone is expected to increase oil production by 490,000 b/d
this year, with Canada contributing a further increase of 180,000 b/d,
OPEC said.
On the demand side, OPEC expects world oil consumption to rise by
760,000 b/d to reach 89.55 million b/d in 2013, 10,000 b/d lower than
its previous estimate.
China is currently expected to see its oil demand rise by 350,000 b/d to
reach 10.06 million b/d this year, but OPEC said this figure could be
increased.
"Chinese oil demand in 2013 could be higher-than-expected as exports and
investments are picking up," it said in the report.
Estimated OPEC output of 30.365 million b/d in December reflects a
465,000 b/d drop from 30.829 million b/d in November that was due
largely to Saudi Arabia reducing output by 421,000 b/d to 9.211 million
b/d in December from 9.632 million b/d in November.
The report also showed a notable drop of 196,000 b/d from Iraq, where
output was estimated to have dipped to 3.011 million b/d in December
from 3.208 million b/d in November.
OPEC last year started running two production tables in its monthly
report, one showing the secondary source estimates and the other showing
direct submissions from member countries.
There are wide differences between the secondary source estimates and
those submitted directly by OPEC members.
The direct submissions for December total 31.422 million b/d, more than
1 million b/d higher than the total derived from secondary sources.
Sanctions-hit Iran, according to the secondary source estimates,
produced 2.656 million b/d in December, slightly down from an estimated
2.677 million b/d in November.
But Iran has told OPEC it pumped 3.71 million b/d in December, up
marginally from 3.708 million b/d in November, leaving the figure more
than 1 million b/d above the secondary source estimate.
According to the direct submissions, Saudi Arabia has told OPEC that it
reduced crude production to 9.025 million b/d in December, down 467,000
b/d from the figure of 9.492 million b/d it gave as its November output.
These figures match those told to Platts last week by an industry source
who said the fall in Saudi production was a response to weaker demand
from customers.
Reports of the lower Saudi volumes had stirred some speculation as to
the OPEC kingpin's oil price aspirations and on January 14 a senior
Saudi oil ministry official issued a statement insisting that Riyadh had
not reduced outputin order to push prices higher.
"Recent media reports wrongly interpret Saudi Arabia's production data
for December, accusing the country of a deliberate attempt to push the
oil price higher. These reports are categorically wrong," oil ministry
adviser Ibrahim al-Muhanna said, pointing out that output fluctuated
from month to month and, at this particular time, was driven primarily
by customer needs and not by prices.
Muhanna said the kingdom stood ready to respond to resumed growth in the
world economy this year, would meet all the needs of customers and
remained strongly committed to a stable oil market.
According to the World Bank in its latest Global Economic Prospects
report, released January 16, the key element for price stability will be
how well OPEC, "and more importantly Saudi Arabia," can address changing
demand conditions.
"Historically, OPEC has been able to respond quickly to defend a price
floor by cutting production sharply, but has been unwilling to respond
as quickly to set a price ceiling," it said.
The World Bank is forecasting an average oil price of $102/barrel this
year, down from $105/b in 2012, and $102.20/b in 2014, "as supplies
accommodate moderate demand growth," though it stresses that there are
both upside and downside risks to these forecasts.
"The assumptions underpinning these projections reflect the upper end
cost of developing additional oil capacity, notably from oil sands in
Canada, currently assessed by the industry at $80/b in constant 2012
dollars. It is expected that OPEC will continue to limit production to
keep prices relatively high. However, the organization may be sensitive
to letting prices rise too high, for fear of inducing technological
changes that alter the long-term price of oil," it said.
On the other hand, the Bank said, ongoing political unrest in the Middle
East continues to pose risks to supply.
"A major supply cutoff could limit supplies and result in prices spiking
well above $150/b. Such [an] outcome would depend on numerous factors,
including the severity, duration, policy actions on emergency reserves,
demand curtailment, and OPEC‘s response. Downside price risks, on the
other hand, include weaker oil demand due to slower economic growth,
especially by emerging economies," it said.
However, the Bank said, "in the near term, oil prices are likely to be
capped at around $120/b because of price-induced demand restraint and
publicly stated intentions of strategic reserve releases by the US, UK,
and France. Upside risks stem from technical and geopolitical problems,
particularly in countries struggling with conflict and security,
including Libya and Iraq."
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