Yesterday the IEA revised its 2009 oil demand forecast up slightly, and a couple of days earlier the US Department of Energy also raised its forecast by a much tinier amount. But as both of these increases followed many months of consecutive downward revisions, they played well in an already excited oil market.
Today, just as oil prices began to subside a little, Opec came out with its monthly report where it puts its demand forecast at 83.8m barrels per day, compared with 84.03m in its May report.
Opec tends to be more cautious on its demand outlook anyway but interestingly it said the revision was not ‘significant’ and sounded a moderately upbeat note in the accompanying text:
In light of the considerable challenges the world economy and commodity markets, particularly the oil market, have undergone, the worst appears to be behind us. Providing this more optimistic sentiment holds, ongoing efforts to reduce the excess supply is the key factor in supporting market stability and should help to gradually bring commercial inventories back to more healthy seasonal levels by the end of the year.
And:
As the world economy stabilizes, the world oil demand appears to be settling down. Industrial
production activities are steadying and in some parts of the world have even improved slightly.
This should stop the bleeding in oil demand. There are no significant downward revisions to our
previous oil demand forecasts. Still, US oil demand is the wild card and any further downward
adjustment in the country’s oil demand would have an impact on total world oil demand.
The IEA meanwhile sounded a noticeably more cautious tone, despite having the biggest upward revision so far. But even that was a mere 120,000 bpd; none of this month’s revisions necessarily change the game.
Opec also pointed to contango flattening as OECD inventories fell, at the same time as Opec production falls:
This turnaround is in large part due to OPEC efforts to stabilize the market by reigning in excess supply and is the result of strong compliance of the OPEC Member Countries with production adjustments. Moreover, seasonal demand changes and the narrowing contango should also support a decline in the overhang in OECD crude stocks and floating storage, although from very high levels of 70 mb and 100 mb respectively.
Opec supply continued to rise in May, however – the report puts it at 134,700 barrels per day higher than in April; and Angola, Venezuela and Nigeria the main offenders.
Related links:
IEA feeds the bulls, but doubts remain (FT Energy Source, 11/06/09)
EIA raises demand forecast by 5,000 bpd (FT Energy Source, 09/06/09)
