By OGJ editors
HOUSTON, June 10 -- The expected balance of supply and demand in this year’s second half indicates a tightening market, the Organization of Petroleum Exporting Countries said in its latest monthly oil market report.
Developing countries are expected to show continued strong growth, accounting for more than 90% of the world’s rise in oil demand this year. And in China this summer, expected power generation shortages threaten to boost the use of diesel generators, which could strengthen demand growth over the coming months, the report said.
But among members of the Organization for Economic Cooperation and Development, uncertainties remain. The earthquake, tsunami, and nuclear events in Japan continue to impact oil use, and it is still unclear when recovery efforts will result in a rebound. Additionally, the latest monthly data from the US shows much weaker-than-expected oil demand, impacted by higher retail prices.
Despite a decline in the overhang of OECD commercial crude stocks since June 2010, oil stocks remain above the 5-year average, and the report warned that worldwide oil inventories could continue to decline as the market sees high seasonal demand in the second half.
OPEC expects worldwide oil demand to increase by 2.3 million b/d in the third quarter and by another 200,000 b/d in the fourth quarter of this year. At the same time, non-OPEC supply and OPEC NGLs are only expected to climb by about 200,000 b/d in the third quarter and by 600,000 b/d in the fourth quarter.
This would result in much higher demand for OPEC crude, reaching a level higher than current OPEC production and implying a likely draw in inventories. This year’s demand for OPEC crude will average 29.9 million b/d, representing an increase of about 300,000 b/d from 2010 and a slight adjustment over last month’s OPEC assessment, according to the report.
To meet this year’s expected demand of 88.14 million b/d with no stock change, OPEC output would need to spike to 30.91 million b/d in the third quarter and average 30.5 million in this year’s final quarter from 28.81 million b/d in the second quarter.
OPEC warns of tightening oil market in second half
By OGJ editors