Oil demand set to slump by 2013
World oil demand growth will slow in 2013 from the already weak 2012, The Organisation of the Petroleum Exporting Countries (OPEC) said, citing Europe's debt worries, a faltering US economic recovery and deceleration of growth in emerging markets.
OPEC,which produces a third of global oil, said daily average demand for its crude in 2013 would stay below its current production levels as additional barrels coming out of non-OPEC producers will be enough to compensate for modest demand growth. “Besides the euro zone crisis, geopolitical tensions in the Middle East, the contraction of manufacturing in the US for the first time since 2010 and decelerating economic growth in emerging markets have been fuelling uncertainties regarding global economic growth,” OPEC said in a monthly report. OPEC left its 2012 world oil demand growth forecast unchanged at 0.9 million barrels per day (mbpd) and said growth in 2013 would amount to 0.82 mbpd.
“The fact that the departure of Greece from the euro zone, with a severe impact on the euro zone economy, still cannot be ruled out remains a cause of concern,” it said. “Such an action would provoke a massive capital outflow from the country and result in a default of its fiscal obligations, with a destabilising effect on the euro zone and beyond.” The group's forecasts are close to those of the US government, which on Tuesday cut its global oil demand growth estimate for 2013 by 360,000 bpd to 730,000 bpd.
OPEC forecast non-OPEC supply to increase by 0.7 mbpd in 2012 and 0.9 million in 2013. “US oil supply is expected to average 10.07 mbpd in 2013, an increase of 0.37 mbpd over 2012. This increase will be the highest among all non-OPECcountries and at the highest annual level since 1986,” OPEC said. OPEC also cited secondary sources as saying Iranian production was down to 2.963 mbpd in June, the lowest in more than 20 decades, while Saudi Arabia had ramped output back to above 10.1 mbpd. Iranian oil output tumbled to its lowest level in more than 20 years last month as tightening US and European sanctions clamped down on the Islamic Republic's export markets.
Although Iran maintains that sanctions haven't made a large dent in its oil production, it is losing an increasing number of its customers. Although Iran has been forced to cut back oil production, "this does not change the supply surplus at all," said Commerzbank in a research note. "Weaker than expected demand, coupled with growing supply, point to a still amply-supplied oil market," it said.