The International Energy Agency (IEA) further cut its global petroleum demand forecast for 2009 to 84.4 million barrels per day (mbpd) - 1.5% or 1.3 mbpd lower compared to 2008 - in its latest monthly report published on 13 March 2009. According to the energy policy advisor representing 28 countries, the world was consuming 86 million barrels of crude oil every day in 2007, which fell to 85.7 mbpd in 2008.
The major highlight of the report is the visible reduction in the global supply of crude oil down 1 mbpd from January 2009 to 83.9 mbpd in February 2009. The crude oil production of 12 members of the Organisation Of Petroleum Exporting Countries (OPEC) stood at 28 mbpd in February indicating nearly 80% compliance by the member countries with the agreed production quotas. Since September 2008, OPEC has cut the production of crude oil by 4.2 mbpd and now the current production level is 1.6 mbpd below what IEA estimates OPEC to produce on an average in 2009. OPEC itself in its latest monthly report has estimated a need to produce an average 29.1 mbpd of oil in 2009.The high compliance level of OPEC spreads bullish sentiments in the crude oil market, particularly when the OPEC is set to meet on Sunday, 15 March 2009 to take stock of the situation and discuss the production strategy. The speculation about another production cut propelled crude oil prices 11.7% in the last couple of trading sessions to $47.3 per barrel - a level last seen in the first week of January 2009. Considering OPEC’s present production level, it now has a spare capacity of around 4.5 mbpd, substantially higher than the average of 1.5 mbpd during 2004 to 2008. This cushion along with the weakening demand for petroleum products is likely to keep the crude oil prices soft in near future. If OPEC goes ahead with another round of production cuts on 15 March, we may see a short rally in crude oil prices.
The major highlight of the report is the visible reduction in the global supply of crude oil down 1 mbpd from January 2009 to 83.9 mbpd in February 2009. The crude oil production of 12 members of the Organisation Of Petroleum Exporting Countries (OPEC) stood at 28 mbpd in February indicating nearly 80% compliance by the member countries with the agreed production quotas. Since September 2008, OPEC has cut the production of crude oil by 4.2 mbpd and now the current production level is 1.6 mbpd below what IEA estimates OPEC to produce on an average in 2009. OPEC itself in its latest monthly report has estimated a need to produce an average 29.1 mbpd of oil in 2009.The high compliance level of OPEC spreads bullish sentiments in the crude oil market, particularly when the OPEC is set to meet on Sunday, 15 March 2009 to take stock of the situation and discuss the production strategy. The speculation about another production cut propelled crude oil prices 11.7% in the last couple of trading sessions to $47.3 per barrel - a level last seen in the first week of January 2009. Considering OPEC’s present production level, it now has a spare capacity of around 4.5 mbpd, substantially higher than the average of 1.5 mbpd during 2004 to 2008. This cushion along with the weakening demand for petroleum products is likely to keep the crude oil prices soft in near future. If OPEC goes ahead with another round of production cuts on 15 March, we may see a short rally in crude oil prices.
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