Demand for OPEC's oil to shrink again in 2010

Reports says demand for OPEC's oil will shrink by 400,000 next year

Abdallah El-Badri, Gulf oil projects, Oil and gas projects Middle east, Oil news, Oil prices, OPEC, OPEC news, Upsteam oil projects, NEWS, Industry Trends

By Martin Morris

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In a feature in its latest monthly report OPEC expects world oil demand to grow by 500,000 barrels a day (0.5 mb/d) in 2010, hitting 84.3 million barrels a day (84.3 mb/d). This compares to average growth of 1.6 mb/d in the five-year period prior to the global recession in 2008.
Demand for its own oil, however, is anticipated to shrink for a third year in 2010, by 0.4mb/d to 28.1 m/bd.

The bulk of the recovery in world oil demand is expected to be seen in H2 2010 when the global economic rebound strengthens. Growth is expected to come mostly from the non-OECD, mainly China, India, the Middle East and Latin America.

US oil demand will remain as a wild card in 2010, given the uncertainty about the pace of the economic recovery there.

In a statement the organisation said: ''The oil market this year has been strongly impacted by the financial crisis, global recession and resulting erosion in world oil demand.

''These factors have substantially magnified the uncertainties affecting the market and contributed significantly to volatility.

''They have also made projecting oil market developments very challenging, as the current uncertainties are expected to continue to cast a shadow over the market in 2010.''

It added: ''Risks remain predominantly on the downside, despite the recent improved sentiment in forward-looking financial and commodity markets.

''In the US, stretched households will require time to readjust their balance sheets, amidst rising unemployment and sharply diminished wealth, implying modest growth in consumer spending.''

The report added that oil prices, taxes, and the removal of retail price subsidies will also impact demand and could lead to further downward revisions.

Should the US experience a stronger and more rapid economic recovery than currently expected, then oil demand could see higher growth, OPEC noted.

Non-OPEC supply meanwhile is projected to increase by 0.3 mb/d to just under 51 mb/d in 2010. Brazil is expected to be the largest contributor to the growth followed by the US.

Contributions will also come from Azerbaijan, Kazakhstan, Canada, China, and India. Mexico and the North Sea are both expected to continue declining in 2010.

Given the projected outlook, the report says increasing OPEC spare capacity and growing idle refining capacity should be sufficient to offset any sudden surge in demand or supply disruption in either crude or products.

This reduces the likelihood of fundamental factors exerting strong upward pressure on prices in 2010.




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