IEA doubts oil market's 'respite' will last

By OGJ editors
HOUSTON, Sept. 10
-- The oil market remains in a period of unusual calm that probably won’t last, says the International Energy Agency.

“Crude prices have generally been range-bound in a $70-85/bbl groove since last October, OPEC production has been anchored close to 29 million b/d since last October, OPEC spare capacity has exceeded 5 million b/d since early 2009, and OECD industry stocks have been oscillating around 60 days for most of the last 18 months,” IEA notes in its September Oil Market Report.

OECD is the Organization for Economic Cooperation and Development, representing industrial countries.

IEA says its oil demand expectations for 2010, which it has updated monthly since the middle of last year, have been at 86.1-86.6 million b/d for the last 11 months.

The monthly demand-growth forecast for the year has been similarly stable at 1.9 million b/d for several months. The growth forecast usually fluctuates as IEA accommodates its demand projection to market changes and updates the prior year’s demand estimate.

“Any impression of certainty about 2010 demand, let alone expectations for 2011, is illusory as final consolidated data can lag by 12-36 months,” the group says.

For 2010, IEA retains its outlook for 4.5% gross domestic product growth worldwide but expects demand growth on an annualized basis to ease from about 2.3 million b/d in the first half to 1.5 million b/d in the second half. Demand growth will slip to 1.3 million b/d next year unless the global economy underperforms current expectations.

IEA calls the apparent market “stalemate” a “welcome respite from the intense volatility of 2007-09.”

But it adds a warning: “The market is unlikely to remain this nonchalant forever, and nor should we be complacent about the continued existence of such a comfort zone.”

Economic risks “skewed to the downside” might keep a ceiling on oil prices for 12-15 months. But IEA expects the market to tighten “from mid-2011 onwards.”



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