OPEC Dampens Expectations It Will Act to Ease Prices
LONDON Jul 16, 2007 (Dow Jones Newswires)
The Organization of Petroleum Exporting Countries Monday dampened expectations it would act to ease high oil prices with fresh forecasts that suggest consumers will need less of its members' crude than they did this year.
The 12 member group, which meets almost 40% of world oil demand, said high oil prices in 2008 won't be cooled by additional shipments.
Within days of consumer watchdog the International Energy Agency warning of a global oil supply squeeze within five years, OPEC's monthly oil market report said the group would be forced to closely monitor the challenge from rival biofuels.
This new challenge, tied with a 2% increase in sputtering oil flows worth 1 million barrels a day from rival producers, could result in 80,000 barrels a day less demand for OPEC oil.
Though small compared with forecast consumption of almost 87 million barrels a day next year, surging demand from emerging economies such as China and India and production constraints mean such sums can make a significant difference to price and sentiment.
OPEC officials and ministers have in recent days made it clear that additional shipments of crude would do nothing to cool prices running at 11 month highs, which they attribute to production troubles in the U.S. and elsewhere, financial speculators and geopolitical tension.
"I don't have a magic solution," Qatar's Oil Minister Abdullah bin Hamad Al Attiyah told Zawya Dow Jones Monday. "None of my customers are panicking for more oil."
"Let me say that oil prices are not at all linked to fundamentals of the oil industry," Saudi Arabia's Oil Minister Ali Naimi said last week. "There is a good balance between supply and demand."
OPEC Secretary General Abdalla Salem el-Badri said in a statement issued last week: "Even if OPEC were to supply the market with additional crude at this time, these refinery-related problems mean that any extra barrels would not be refined into products."
Next year will see refinery problems continue to exert "further upward pressure, despite the healthy crude market," Monday's report said.
Underscoring OPEC's comfort with current output levels, the group said Monday its estimated daily output last month fell more than 3%, or nearly 100,000 barrels, on the month to 29.98 million barrels, led by shortfalls from Iraq.
OPEC also cut a hefty 200,000 barrels a day from its estimated output this year from rival producers, most of it attributed to weak production from Norway.
Last month, Norway said preliminary data showed output fell to 1.88 million barrels a day, the lowest it has been in 16 years. At its peak in 2000, Norway was producing 3 million barrels.
The IEA, whose supply and demand forecasts underpin governments' oil policies and market sentiment, conceded Friday it had overestimated future production from countries such as the U.S., Norway and the U.K.
The Paris-based agency said it was adjusting the way it estimated output shortfalls to account for "tight drilling and service markets and aging infrastructure," the agency said, noting "unscheduled outages are now part of the industrial landscape." This followed a review of historic data showing consistent discrepancies between its forecasts and actual oil flows.
World oil and gas supplies from conventional sources are unlikely to keep up with rising global demand over the next 25 years, the U.S. petroleum industry said in a draft report of a study commissioned by the government and seen by the Wall Street Journal.
"It is a hard truth that the global supply of oil and natural gas from the conventional sources relied upon historically is unlikely to meet projected 50% to 60% growth in demand over the next 25 years," says the draft report, titled 'Facing the Hard Truths About Energy.'
Brent crude oil futures in London at 1140 GMT were 27 cents higher against Friday's close, at $77.40 a barrel, with U.S. light, sweet crude futures in New York 37 cents higher at $74.50 a barrel.
Copyright (c) 2007 Dow Jones & Company, Inc.
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