Opec expects demand for its crude to be lower than expected in 2013 because of higher supply from rival producers, indicating inventories could build up substantially even after a cut in output by top exporter Saudi Arabia.
The Organization of the Petroleum Exporting Countries’ monthly report indicated world supply will comfortably outstrip demand in the first half of 2013, even after Riyadh cut output in December by almost 500,000 barrels per day (bpd) to fend off a supply overhang and defend prices well above $100 a barrel. Opec lowered the 2013 forecast demand for its crude by 100,000 bpd to 29.65 mbpd, as it expects producers outside the 12-member group to pump more.
This is less than Opec’s December output of 30.37 mbpd as estimated by secondary sources. Demand for Opec crude will average 29.07 mbpd in the first half of 2013, the report estimated, implying inventories could build up by about 1.3 mbpd should Opec maintain December’s output rate.
The report made only a marginal cut in its forecast for global growth in oil demand in 2013, trimming the estimate by 10,000 bpd to 760,000 bpd. The expansion will be led by China and other fast-growing economies. “World economic turbulence has affected oil demand in the past few years,” Opec said. “Nevertheless, its effect on this year’s oil demand is not expected to be as sharp as last year, but instead considerably milder.” Opec’s is the second of this month’s three closely watched supply and demand reports to be released. The US government’s Energy Information Administration last week trimmed its 2013 demand growth forecast by 20,000 bpd.
The International Energy Agency, adviser to 28 industrialised countries, issues its report. Opec has a target for its 12 members to produce 30 mbpd. With prices above Riyadh’s preferred $100-mark but with expectations of slower demand in early 2013, Opec at a meeting in December left the target unchanged, leaving the door open to informal supply tweaks depending on demand. Saudi Arabia told Opec it produced 9.025 mbpd in December, down from 9.49 mbpd in November, confirming figures provided last week by an industry source familiar with Saudi policy. Major customers of state oil company Saudi Aramco said the cuts were driven by lower demand. Record Saudi output last year of up to 10 mbpd helped to cushion the impact of Western sanctions on Iran over its nuclear programme by helping to bring prices down from a 2012 high of $128 in March.
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