The Organization of the Petroleum Exporting Countries edged 100,000 bpd higher its expectations for global oil demand in 2010, now anticipating next year's world consumption rate at 85.0 million bpd, announcing their revision from October in their Monthly Oil Outlook Report for November released last week.
"Most of the signs are aiming toward higher world oil demand growth in 2010; however, downward risk factors highlight the need for caution," said OPEC in their report, adding that "the potential weak economic recovery may dampen potential demand growth in the coming year."
The oil cartel left their forecast for 2009 unchanged at 84.2 million bpd, which marks a 1.4 million bpd decline in demand compared with 2009.
"US oil demand remains the major factor driving 2009 demand growth," said the cartel. "Despite the improved performance in late summer, recent data indicates a contraction in demand in October."
OPEC said their Reference Basket price of crude oil surged $5.50 or 8 percent in October to reach $72.67 bbl on bullish sentiment that "was strengthened by upward adjustments to world oil demand following revision to GDP numbers by the [International Monetary Fund]."
The authors of the report said a weakening US dollar and rising stock market "also contributed to the upward price trend along with counter-seasonal draws in US gasoline inventories."
The Basket price continued to increase in early November, standing at $76.50 bbl on Nov. 11.
"Recent market volatility suggests that crude prices are likely to remain in the high $70s in the near future with price direction continuing to be impacted by economic data and US dollar fluctuations," said OPEC.
The world economy is in recovery notes the report's authors, with the latest forecast calling for 2.9 percent growth in 2010 after a 1.1 percent contraction for this year. Emerging Asian economies are leading the recovery, with China still expected to grow its economy 8.0 percent this year and 8.5 percent in 2010.
"Fuelled by the unprecedented fiscal and monetary stimulus, [Organization for Economic Cooperation and Development countries'] output is expected to show positive growth in the 3Q09. Still, it remains to be seen when private consumption expenditures will pick up sufficiently as government support fades," said OPEC.
All major OECD regions are projected to return to growth in 2010, with the U.S. forecasted to grow 1.4 percent, the Euro-zone at 0.5 percent and Japan at 1.1 percent.
The monthly report also revised higher expected demand for OPEC crude in 2009 by 70,000 bpd at 28.7 million bpd. If realized, this marks a 2.3 million bpd decline from 2008. In 2010, OPEC crude demand is projected at 28.5 million bpd, revised up by 110,000 bpd from October, while reflecting a 200,000 bpd decrease compared with this year.
In October, OPEC crude production averaged 28.99 million bpd, up roughly 40,000 bpd from September.
OPEC spot fixtures increased in September by 3 percent compared to the previous month, with sailings from OPEC relatively steady. Freight rates in the crude oil tanker market increased by 11 percent in October with the Very Large Crude Carrier sector increasing by 17 percent and Suezmax by 7 percent.
"Product spot freight rates gained an average of 2% with a much firmer East of Suez market," said OPEC.
Volumes of crude oil stored on tankers were steady at about 40 million bbl in October, while petroleum products stored on tankers increased by about 25 million bbl to 90 million bbl.
Non-OPEC supply is expected to increase by 360,000 bpd in 2010 to 51.2 million bpd, with Brazil, Azerbaijan, Kazakhstan, Canada, and the U.S. driving the increase next year. Mexico, the United Kingdom, and Norway are projected to post the largest declines in supply in 2010.
In 2009, non-OPEC supply is estimated to increase by 410,000 bpd, representing a minor upward revision from the previous assessment.
OPEC NGLs and non-conventional oils are projected to reach 5.3 million bpd in 2010, "indicating a significant growth" of 540,000 bpd from this year.
"Product market sentiment improved slightly in October due to product stock draws in the US, increasing freight movements and relatively higher demand from industrial sectors," said OPEC. "However, rising crude costs have overwhelmed positive developments in product prices and exerted pressure on refining margins, especially in the Atlantic Basin."
OPEC said a cold winter could support products demand and trigger increase production from refiners, but "excessive levels of distillate stocks could further constrain refinery operations, impacting crude stock movements."
