The global crude oil industry is now witnessing the emergence of two paradoxical trends. At a time when the global demand outlook for 2012 and 2013 is being revised downwards month after month, oil prices are on a boil. Surely, factors other than demand-supply dynamics are having a major influence on oil prices.
The benchmark Brent crude prices rose over 29% since end-June 2012 to $116 in the first week of September. However, the International Energy Agency (IEA), which represents the OECD nations, or mainly petroleum consumers, has revised downward its total demand forecast for 2012 and 2013.
In its latest monthly report IEA noted that global oil demand would average 89.6 million barrels per day (mbpd) in 2012, which is down from 89.9 mbpd estimated in June and 90 mbpd estimated at the start of the year. Sluggish global economic growth is the main reason for this, with persistently high prices taking its toll as well.
GDP growth estimates for the world’s biggest economies are being revised downward. According to the IEA report, “China endures the majority of the reduction”, with its GDP growth for 2012 pegged at 8% (8.2% earlier) and for 2013 at 8.1% (8.5%). The economic outlook for the US in 2013 has been lowered to 2% now from 2.3% last month.
The reasons behind the spurt in oil prices were mainly non-economic. The re-emergence of geopolitical tensions, production problems in the North Sea and hopes that the world’s major economies would act to ease monetary policy were among the main reasons for the overall increase in global crude oil prices, the Organisation of Petroleum Exporting Countries said in August.
Owing to US and EU sanctions, crude oil exports from Iran have fallen nearly 20% since the beginning of the year to 2.9 mbpd now. Oil prices were also boosted by Fed chairman Ben Bernanke’s hint at a third round of liquidity infusion and Hurricane Isaac, which hit the US coast last week.
However, for crude, the demand growth outlook for 2013 is not bullish. IEA expects oil consumption to grow 0.9 mbpd in 2012 and 0.8 mbpd in 2013.
However, at the same time production growth is expected to be healthy. IEA estimates OPEC’s production at 31.4 mbpd for July 2012, while the ‘call on OPEC’ – the volume OPEC needs to produce to balance the global demand and supply – “will recede to 30.4 mbpd for Q4, 12 and to 30.1 mbpd in 2013”.
However, oil prices are expected to be driven by sentiment and liquidity for a while before economic factors prevail.
The benchmark Brent crude prices rose over 29% since end-June 2012 to $116 in the first week of September. However, the International Energy Agency (IEA), which represents the OECD nations, or mainly petroleum consumers, has revised downward its total demand forecast for 2012 and 2013.
In its latest monthly report IEA noted that global oil demand would average 89.6 million barrels per day (mbpd) in 2012, which is down from 89.9 mbpd estimated in June and 90 mbpd estimated at the start of the year. Sluggish global economic growth is the main reason for this, with persistently high prices taking its toll as well.
GDP growth estimates for the world’s biggest economies are being revised downward. According to the IEA report, “China endures the majority of the reduction”, with its GDP growth for 2012 pegged at 8% (8.2% earlier) and for 2013 at 8.1% (8.5%). The economic outlook for the US in 2013 has been lowered to 2% now from 2.3% last month.
The reasons behind the spurt in oil prices were mainly non-economic. The re-emergence of geopolitical tensions, production problems in the North Sea and hopes that the world’s major economies would act to ease monetary policy were among the main reasons for the overall increase in global crude oil prices, the Organisation of Petroleum Exporting Countries said in August.
Owing to US and EU sanctions, crude oil exports from Iran have fallen nearly 20% since the beginning of the year to 2.9 mbpd now. Oil prices were also boosted by Fed chairman Ben Bernanke’s hint at a third round of liquidity infusion and Hurricane Isaac, which hit the US coast last week.
However, for crude, the demand growth outlook for 2013 is not bullish. IEA expects oil consumption to grow 0.9 mbpd in 2012 and 0.8 mbpd in 2013.
However, at the same time production growth is expected to be healthy. IEA estimates OPEC’s production at 31.4 mbpd for July 2012, while the ‘call on OPEC’ – the volume OPEC needs to produce to balance the global demand and supply – “will recede to 30.4 mbpd for Q4, 12 and to 30.1 mbpd in 2013”.
However, oil prices are expected to be driven by sentiment and liquidity for a while before economic factors prevail.
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