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Monthly Oil Reports and the OPEC Meeting

Published Wednesday, June 13th, 2012

All three agencies (the EIA, OPEC and the IEA) have come out with their latest supply/demand balance forecast. Let’s look at the average numbers of these reports.

Global demand is expected to be 90 mbpd for the second half of this year. Against it we have non-OPEC production estimates at 53.24 mbpd and OPEC other than crude oil liquids at 5.95 mbpd, giving us a call of 30.80 mbpd. If OPEC maintains its current production of 31.582 mbpd then global stocks will build by slightly more than 700,000 bpd in 2H 2012. It is much smaller than the 1.97 mbpd surplus we are seeing in 1H 2012, nevertheless it is still a build. At current OPEC production global oil stock will keep rising for the rest of this year providing ample supply cushion.

The general consensus is that the organization will maintain its official 30 mbpd production ceiling at tomorrow’s meeting. If the ceiling is raised it will have bearish implications although it will not mean that current OPEC production will also neccesarily increase. If, for whatever reasons, the cartell decides to cut production back, bulls will see it as an opportunity to get back into the market. Heated arguments are expected between Saudi Arabia and Iran but probably Saudis will have the upper hand, which means that production ceiling will either be left unchanged or moved closer to the actual output level. If correct, the final outcome of the meeting will be neutral-to-bearish as far as oil prices are concerned.

Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.

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