OPEC, U.S. government see easing oil market conditions ahead
VIENNA/NEW YORK |
VIENNA/NEW YORK (Reuters) - OPEC and the U.S. government agreed on Tuesday that global oil markets could loosen further in the second half of the year, with prospects for demand dimming while non-OPEC supply races ahead more quickly than expected.
In its monthly report on market fundamentals, the U.S. Energy Information Administration, or EIA, cut its forecast for oil demand growth this year by 150,000 barrels per day to 810,000 bpd as the European crisis continues to weigh on the world economy. Rapid growth in U.S. and Canadian production forced the agency to revise up its estimates for non-OPEC output.
The Organization of the Petroleum Exporting Countries, releasing its report just two days before its ministers meet to set production policy, made few adjustments to its forecasts, but said risks appeared skewed toward looser conditions.
"The second half of the year could see a further easing in fundamentals, despite seasonally higher demand," OPEC's analytical division said in its monthly report.
Factors OPEC cited include a slowing world economy, risks to demand, including high U.S. gasoline prices, and supply performing well in non-member countries, supported by growth in the United States.
The pair of reports will be followed on Wednesday morning by the Paris-based International Energy Agency (IEA), whose forecasts are the most closely watched of the three.
OPEC said it expects demand for its crude to average 30.74 million bpd in the second half of this year, unchanged from its forecast last month.
The EIA said non-OPEC output would rise by 800,000 bpd this year -- more than the 680,000 bpd it predicted a month ago. Production growth in the United States and Canada will total 890,000 bpd this year, offset by declines elsewhere.
"The largest area of non-OPEC growth is North America... resulting from continued production growth from U.S. onshore shale and other tight oil formations and Canadian oil sands," the EIA said.
OPEC is pumping above demand for its crude and some members, including Venezuela, are expected to call at Thursday's meeting for the group to lower supplies to prop up prices.
Brent crude oil has fallen more than $30 a barrel since the beginning of March, settling at a 16-month low of $97.14 a barrel on Tuesday.
In May, OPEC produced 31.58 million bpd, according to secondary sources cited by the producer group's report, 58,000 bpd less than in April but still 1.58 million bpd more than OPEC's supply target of 30 million bpd.
"High OPEC crude oil production standing above market requirements provides further confirmation that the market remains amply supplied," OPEC said.
But according to a second set of production figures reported by OPEC and provided by member countries, Saudi Arabia has trimmed its production, pumping 9.8 million bpd in May compared with 10.1 million bpd in April, the report said.
Higher output from Saudi Arabia has helped calm market fears about the impact of existing and pending sanctions against Iran's oil industry and exports.
The EIA said it expects Iran's crude oil production to fall by 850,000 barrel per day by the end of 2012 because of a lack of investment, reducing its output to 2.7 million bpd from 3.55 million bpd at the end of last year.
The EIA said its forecast did not factor in the potential further impact of more "recent sanctions targeting Iran's central bank and the impending European Union embargo on Iran's crude oil production," which come into effect on July 1.
"The impact that has on the oil supply and demand balance in the second half of the year will depend on the degree to which recently lofty Saudi production volumes are sustained," said Katherine Spector, commodity strategist at the Canadian Imperial Bank of Commerce in New York.
"The Saudis will have to maintain elevated production to keep inventories from drawing."
The EIA said it expects Iran's crude oil production to fall by another 200,000 bpd in 2013, though that may be offset by the build-up in inventories in developed economies.
Inventory levels in the Organisation for Economic Cooperation and Development (OECD) are projected to increase by 2.65 billion barrels over the course of 2012, the EIA said, taking the number of days of forward cover to almost 58, a near 15-year high.
(Reporting by David Sheppard, Matthew Robinson and Selam Gebrekidan in New York; Editing by Alden Bentley and Dan Grebler)
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