January is a time for new resolutions and also for updates to supply/demand and pricing forecasts. The latest analysts to tweak their numbers are those at Sanford Bernstein. And, as Energy Source noted on Monday, the prospect of new Iraqi supplies was one of the reasons for making the amendments.
It turns out that Bernstein was too gloomy about 2009 in terms of both demand and supply numbers. The downturn in the global economy shrunk the need for oil less dramatically than its analysts had predicted and the world’s oil suppliers outside the Opec oil cartel were better at bringing new projects to fruition – especially in the US and Russia – than the Bernstein folks had predicted. Bernstein now expects growth of 1.6 m barrels a day in 2010 and 1.1m b/d in 2011.
In terms of Opec supply, Iraq is the biggest factor to watch. Here is how Sanford put it in today’s note:
The most significant change to our forecast for OPEC supply is around Iraq. While contracts signed to date would see the country producing 12 Mbpd by 2020, we remain much more cautious. Underinvestment in reservoirs and infrastructure over the past decade, continuing (albeit reduced) security concerns, and inevitable project delays and complications mean we forecast capacity of 6.5 Mbpd and actual production of around 5-6 Mbpd by 2020 as OPEC quotas limit production to support prices.
That production came one step closer to reality yesterday when an oil ministry spokesman told newswires in Baghdad that the country’s cabinet had ratified all of the contracts auctioned off in 2009.
Whether the new supplies find a home is more up to developing countries than developed ones. Bernstein expects growth from developing countries in particular to push demand up 1.5 per cent in 2010.
But after all those tweaks, Bernstein stands by its oil price prediction, which at $80 a barrel, falls into familiar territory even if it is on the high end of the range of others’ expectations.