VIENNA, 17 November 2005 — OPEC estimates that world demand for oil will increase by 1.2 million barrels per day (bpd) in 2005, resisting “demand destruction” from crude being too expensive, according to the 11-nation organization’s monthly report issued yesterday.
“Following six consecutive monthly downward revisions, world oil demand has shown signs of recovery in the last couple of months,” the Organization of Petroleum Exporting Countries said in its November report. “World oil demand is forecast to grow by 1.2 million barrels per day or 1.4 percent to average 83.3 mbd for the whole of 2005,” it said.
“Further undercutting the arguments for ‘demand destruction’, these higher figures are supported by vigorous preliminary growth data from developing countries, a brighter outlook for the world economy, particularly for the United States and OECD Pacific countries, and a rebound in Chinese apparent demand,” the report said. It said: “Impressive data from the euro zone confirmed that the third quarter was a period of strong growth for the world economy.” “Accommodative monetary policies, low inflation rates and health growth in world trade boosted manufacturing output. “High levels of household wealth allowed consumers to absorb the higher energy prices whilst improved levels of energy efficiency have moderated the impact on industrial costs,” OPEC said.
“The forecast growth rate for the world economy in 2005 has been increased to 4.3 percent and is expected to be followed by growth of 4.1 percent next year,” it said. But it said “the impact of higher energy prices and reduced subsidies on developing Asia is not yet clear” and also uncertain “is the resilience of the US economy in the face of rising interest rates.” “A setback to the growth of consumer spending in the United States would impact exports and investment in China and other Asian economies,” OPEC said.
It added that “in 2006, average world oil demand is projected to grow by 1.5 million bpd or 1.8 percent to average 84.8 million bpd, which represents a slight upward revision from last month’s figure”.
OPEC said prices were volatile in October, with downward pressure from expected tapping of strategic national reserves but upward pressure from “higher demand and lower non-OPEC supply.” Still, “ample OPEC supply as evidenced by higher US crude oil stocks kept the bearish trend alive.”
It said the price for the basket of OPEC crude “slipped well below the $55 a barrel level to stand at $50.01 per barrel on Nov. 15.”
Oil prices jumped yesterday. New York’s main contract, light sweet crude for delivery in December, shot up 87 cents to $57.85 per barrel in pit trading, after briefly touching $58. In London, the price of Brent North Sea crude for January delivery gained 70 cents to $55.88 per barrel in electronic trading.