Two oil bears: Vitol and Opec

The IEA and the EIA have both revised their 2010 oil demand forcasts upwards this month, though only slightly. The IEA is now expecting almost 1.6m barrels per day, while the EIA puts the number at 1.2m.

Opec meanwhile kept its more pessimistic forecast of 800,000 b/d growth – and even revised it downwards, albeit by a tiny 10,000k.

Their key reason: uncertainty about economic recovery, and about how that will affect demand. It is focused on the US and other OECD economies – though not entirely, as the chart opposite shows.

Opec is known for being a little more bearish than other forecasters on oil demand – after all, it’s a producer.

But Vitol, the world’s largest oil trader, is not so much known for pessimism. It is however pessimistic – and for similar reasons to Opec.

The FT reports the trader citing ‘uncertain’ prospects for demand as the key reason for its gloom:

The physical trader’s sober view contrasts with more upbeat forecasts from several Wall Street companies, including Goldman Sachs and BofA Merrill Lynch. Goldman, for example, has forecast a strong recovery in consumption, with oil prices rising to $95 a barrel by the end of the year, and above $100 in early 2011.

After a strong rally until the middle of last year, oil prices have traded between $70 and $80 a barrel for the past four months and Vitol says that range is here to stay for this year. Ian Taylor, Vitol chief executive, warned: “The global economic outlook and the dynamics of future oil demand remain uncertain.”

Opec, too, is very concerned about uncertainty. It names US demand as a key uncertainty, ‘despite positive economic signals’ — echoes of the cartel’s fears about demand destruction. On a similar theme, the IEA is also talking about an oil-less recovery this month – Opec however is more pessimistic about what an OECD recovery glitch would mean for demand:

The global recovery is proceeding apace, led by manufacturing, but the strength of the upturn in 2010 is still uncertain and regionally uneven. Stronger growth is expected in non-OECD in the range of 5-6%, spearheaded by Chinese growth of around 9%, while OECD is not likely to exceed the 2% mark. Indeed, according to our latest forecast, real GDP in the US in 2010 will only be 0.4% above the pre-crisis level, in sharp contrast to a 29% increase in China. Moreover, in the major OECD countries, the recovery is far from self-sustaining and remains largely dependent on continued government support. Moreover, uncertainties related to the timing and coordination of exit strategies and the ongoing debate on regulatory financial reform may add a further layer of risk to the other challenges faced by advanced economies.

Related links:

Revealed: Opec’s fears that rich countrie’s appetite for oil is waning (FT Energy Source)

Leading oil trader damps hopes (FT)

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