VIENNA, 16 April 2005 — Rising OPEC oil production should help calm the world oil market but structural problems remain that could support high prices, OPEC said in its monthly oil market report released yesterday.
“Total OPEC crude production, according to secondary sources, averaged 29.76 million barrels per day in March, which represents an increase of 300,000 barrels per day compared to February,” the Vienna-based Organization of Petroleum Exporting Countries said in its April report.
OPEC said “global oil stocks are expected to continue to build in the coming months” and “even with the high expected demand for OPEC crude, spare capacity should be more than adequate.” “OPEC members have been investing heavily and above trend in expanding production and capacity,” the 11-nation organization said.
But refinery capacity in developed nations was a stubborn structural problem.
OPEC said that “the lingering cold weather in the northeast of the United States and northeast Asia, coupled with planned and unplanned refinery maintenance across the world and the unexpected drop of US gasoline stocks in March, switched market sentiment in favor of product developments.”
It said “fears of a gasoline supply crunch in the US driving season” had “overshadowed” the fact that crude oil stocks were in fact growing and led to “aggressive fund-buying as well as record-high prices both for crude and products.”
OPEC warned that while this crunch should diminish, the continuing “limited effective refinery spare capacity, especially in the United States” meant that “the products market remains exposed to refinery glitches (which) could affect crude prices again.”
OPEC said total world oil demand in 2005 was projected to rise by 1.89 million barrels per day, or 2.3 percent, to average 84.02 million barrels per day, on continued strength in global oil consumption above recent years but below 2004.”
Robust world economic growth should continue, despite a slowdown in Western Europe.
The forecasts for US economic growth “for 2005 stand unchanged at 3.4 percent and the Japanese forecast remains 1.4 percent while the forecast for the euro zone has been reduced to 1.3 percent from 1.4 percent,” OPEC said.
“The 2005 growth rate forecast for China is unchanged at 8.2 percent,” it said, adding that “the forecast growth rate for the world economy in 2005 also remains unchanged at 4.1 percent.” According to OPEC, “the main growth engines of the world economy remain the United States and China.”
OPEC said that consumer spending the United States may decline in the second quarter as a result of higher energy prices.
Meanwhile, world oil prices resumed their downward march yesterday after a brief rally petered out amid easing worries over possible supply shortages.
New York’s main contract, light sweet crude for delivery in May, fell 68 cents to $50.45 per barrel in early deals.
In London, the price of Brent North Sea crude oil for delivery in June dropped 56 cents to $51.73 per barrel.
The May contract expired on Thursday, priced at $50.91.
“The market is going to test again 50 dollars, that’s a big psychological number,” said Graham Sharp, director of trading at Trafigura.