OPEC, Energy Dept. revise oil demand forecasts for 2009
OPEC production cuts of more than 1 million barrels likely, say experts
By Dave Hannon -- Purchasing, 12/16/2008 4:04:00 PM
Both the Organization of Petroleum Exporting Countries and the U.S. Energy Department are forecasting that global oil demand will be down significantly in 2009 as global economies slow, giving OPEC more reason to cut production at its meeting tomorrow and prop up oil prices in the short-term.
OPEC, which meets tomorrow in Algeria to decide on production cuts, lowered its forecast for 2009 oil demand by 2.3% or 700,000 barrels/day. Overall the cartel expects demand for oil in 2009 to be more than 1 million barrels/day lower than in 2008.
And in its latest forecast, the U.S. Energy Department forecasts that global oil consumption is expected to decline by 450,000 barrels/day in 2009. The Energy Department projects that OPEC crude production will fall from 32.6 million barrels/day in the third quarter of 2008 to 30.6 million in the first quarter of 2009.
So how much will OPEC cut tomorrow? In a recent Bloomberg report, Peter Beutel, president of Cameron Hanover, an energy consulting company in New Canaan, Conn. said he expects OPEC to cut by at least 2 million barrels tomorrow and maybe even more. According to Reuters, OPEC’s president, Chakib Helil told a Middle East newspaper today that cutting production by “Even a million barrels is not enough. It should be much more for the stability of the markets.”
The Associated Press reports that Venezuela's energy minister Rafael Ramirez said after arriving in Algeria for the meeting that Venezuela favors a cut of between 1 million to 2 million barrels/day at the meeting.
Production cuts that large will likely drive oil prices up in the short-term. According to the OPEC web site, the price of OPEC basket of 13 crude oils stood at $42.53/barrel on Monday, up slightly from $41.32 the previous Friday. OPEC’s Reference Basket price began the year at $92, climbed to a peak of $141 in July and, since then, has fallen to a trough of $42 in December.
Closer to home, the Energy Information Administration says the monthly average price of West Texas Intermediate (WTI) crude oil has fallen by more than half between July and November, reflecting the fallout from the rapid decline in world petroleum demand. The annual average WTI price is now projected to be $100/barrel for 2008 and $51 in 2009, down from the $63.50 predicted a month ago for 2009.
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I cannot say what will be cut, because cuts will not ultimately correct a lack of demand. The...
Sean Lawrence - 2008-16-12 18:51:00
