AKA ‘Demand is in the toilet‘, part 2.
Opec says it could take until 2013 for demand to recover to last year’s level. As is the cartel’s wont, the forecast is more bearish than the IEA’s medium-term forecast published two weeks ago, which saw a net rise in demand through to 2014 – albeit a much leaner one than previously forecast.
The cartel has provided a handy chart of how it has revised its forecasts since last year:
Meanwhile, Opec has oodles of spare capacity:
Opec and speculators
Elsewhere in the report, Opec stressed its desire to have more price stability:
OPEC has repeatedly called for better regulation and increased transparency in
these markets, for the benefit of both producers and consumers alike. This call had a
prominent place in the foreword of last year’s WOO. There is evidently a need for this
to be repeated here.
Opec did in fact point out in last year’s foreword that oil prices did not seem to reflect supply and demand fundamentals (remember, this was July 2008, the month when oil prices reached the all-time high of $147) but it did not specifically mention regulation or transparency:
There are a number of factors. These include a move by many financial institutions
into index trading and both regulated and unregulated commodity exchanges,
the sharp slide in the value of the US dollar, ongoing geopolitical developments, and
While OPEC itself has no influence over speculation and investor behaviour, it
continues to take action in other important areas where it can make a solid, meaningful
contribution, in the interests of market order and stability.
It went on to damp down peak oil-type sentiment:
I also feel it is important to highlight the fact that we continue to hear a number of
voices pushing ideas of resource pessimism, a topic that interestingly has been around
for almost the entire history of the oil industry. This is fuelling speculation.
So it’s taking a much stronger line in this year’s report on the question of regulation. Wild price gyrations are in no-one’s interest, nor is an oil price so high it snuffs out a potential recovery.
Opec stirs oil speculators (FT Energy Source, 28/05/09)
Opec ministers divided: fundamentals, or a bubble? (FT Energy Source, 29/05/09)
‘Demand is in the toilet’ (FT Alphaville)