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Published: September 11, 2009
The Organization of the Petroleum Exporting
Countries (OPEC) said Thursday that it would keep production
quotas at 24.845 million bpd and urge members to adhere to
targets, as global demand has yet to return in full.
However, a report from the International Energy Agency (IEA)
indicated that demand is recovering more quickly than previously
thought, and that OPEC may be playing catch-up as the global
recovery gathers steam.
The IEA increased its outlook for global oil demand by nearly
500,000 barrels per day (bpd) for 2009 and 2010, to 84.4 million
and 85.7 million bpd respectively.
Perhaps the biggest reason for the increase was surging demand
in China, where the Red Dragon’s $587 billion (4 trillion yuan)
stimulus plan has resuscitated manufacturing and helped China
grow into the world’s largest auto market.
China’s imports of oil hit a record high in July, soaring +18%
from the month prior to 19.63 million metric tons, or about 4.64
million barrels a day, according to the nation’s General
Administration of Customs.
China's economy grew by +7.9% in the second quarter, and Beijing
estimates +8% growth for the year, compared to an expected -3%
dip for the United States.
Chinese demand for oil this year
will grow by +2.8%, according to the
IEA.
"I am more confident today than what
I was back in May," about China’s
economic recovery, Saudi Oil
Minister Ali Naimi told Bloomberg.
The rise of China has been a
tremendous boon to OPEC -- which
controls 40% of the world’s oil
supply -- particularly since the
financial crisis has crimped oil
demand in developed nations around
the world.
"We’re looking East more these
days," said Kuwaiti Oil Minister
Sheikh Ahmad Abdullah al-Sabah.
The IEA expects demand for oil in
North America to plunge -4.4% this
year. However, that figure is an
improvement from last month’s
forecast of -5.1%, and could
accelerate further as the recovery
gains momentum.
Data for gasoline and heating oil
consumption in June showed a "hefty"
increase in demand the IEA said.
That data was further substantiated
yesterday when the Energy Department
reported a larger-than-expected drop
in inventories.
Inventories dropped by 5.9 million
barrels for the week ended Sept. 4
-- more than three times estimates
of analysts surveyed by Platt’s, the
energy information arm of
McGraw-Hill Cos, according to The
Associated Press.
Indeed, even Saudi oil minister
Naimi has acknowledged the bullish
shift in the market.
"You guys must realize that there is
a fundamental change in the market,"
he told reporters ahead of the
night-time meeting that agreed to
keep supplies officially unchanged.
"Economic growth is the name of the
game, that’s what’s going to drive
the price. As long as economic
growth is there, the price is going
to go up."
Still, OPEC remained cautious,
opting to keep production level
until demand in the West returns to
its pre-crash levels. Of course,
that means the cartel will likely be
playing catch-up, boosting
production behind price increases as
the economic recovery gains
momentum.
Oil prices have more than doubled
from their February lows, closing
yesterday at $72.17 a barrel on the
New York Mercantile Exchange (NYMEX).
Goldman Sachs Group Inc. (NYSE:
GS) has raised its 2009 oil
price forecast to $85 a barrel from
$65 and said prices would reach $95
a barrel in 2010.
-- Bob Blandeburgo
Associate Editor
MoneyMorning.com |
