As crude oil prices remain solidly above $80, the analysts at the Centre for Global Energy Studies are a little wary of Opec warning of a second-quarter decline in demand. The focus in markets, CGES notes, is on the demand side now, with China’s reported consumption soaring and a widespread belief that non-Opec supply has peaked. And they demonstrate that the second quarter is not usually a difficult one for Opec:
Oil prices have broken through the psychological $80/bbl barrier after several months of trying and failing. They show little sign of slipping back, despite OPEC’s usual (but misplaced) concerns about second-quarter weakness. While professing contentment with oil prices in a $70-80/bbl range, comments from within OPEC suggesting that the Organisation would only act to formally raise output once prices topped $100/bbl added further bullish sentiment to a market that was already digesting upward revisions to global GDP growth forecasts, record levels of Chinese imports and a continuing belief that non-OPEC oil supplies have reached a plateau, above which they are unlikely to rise.
Here they are referring to comments by Kuwait’s oil minister, who has referred to the $100 level at least twice in the past few weeks. This appears to contradict Saudi oil minister and de facto Opec leader Ali al-Naimi, who as recently as late March was re-iterating his belief that $70 – $80 was a ‘perfect’ price range. As usual, actions from Saudi Arabia, the only member with significant spare capacity, will speak louder than anyone else’s words.
However CGES notes that supply has already been increasing and, so far, the market has taken little notice.
Saudi Arabia’s crucial role in the oil price outlook – FT Energy Source