OPEC says more than enough oil to meet market needs this year, but IEA says no room for complacency

By Margaret McQuaile

May 11, 2012 - OPEC said on May 10 that rising crude production from its own members and higher oil supply from non-OPEC producers would be more than enough to meet the needs of world oil markets this year.

It noted that OECD stocks had risen contra-seasonally to "comfortable levels" above the five-year average in the first quarter and were equivalent to 59 days of forward cover, while the supply/demand balance also suggested a "substantial" build in stocks outside the OECD, particularly in China.

"Based on the current forecasts for global oil supply and demand, incremental non-OPEC supply and the increase in OPEC NGLs will satisfy expected growth in world oil demand this year," the oil producer group said in its latest monthly oil market report. "In addition, higher OPEC crude oil production underscores the current trend of plentiful supply in excess of market requirements."

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OPEC expects demand for its crude to average 29.98 million b/d this year, well below current estimates of its members' output which, for April, OPEC itself estimates at 31.62 million b/d, Platts at 31.71 million b/d and the International Energy Agency 31.85 million b/d. The cartel has a notional 30 million b/d output ceiling, agreed in December, which covers all 12 members but does not include individual country quotas.

The IEA, which published its monthly report on May 11, said that some of the nervousness which had driven prices to record highs in March had receded as a result of higher OPEC production and OECD inventories.

"But there is no room for complacency: the path of market fundamentals for the rest of the year remains highly uncertain and geopolitical risks will likely continue to keep prices high," it said, adding that it would continue to monitor market conditions and stood "ready to act if supply conditions warrant it."

But the IEA appears to have little appetite for a stock release, executive director Maria van der Hoeven saying on May 3 that the time was not right for a such a move.

"There might be -- might be -- an occasion to do a stock release, but it is not the case to do it at the moment," she said on May 3 at a Paris conference.

OPEC, meanwhile, in its previous monthly report, introduced without explanation a table of output figures submitted directly by members. These figures, incomplete at the time beyond February, contrasted starkly with the secondary source estimates.

The cartel's May report fills in the missing direct submissions for March to achieve a total of 32.424 million b/d -- 1.125 million b/d more than the secondary source March total of 31.299 million b/d.

The direct submissions table for April does not include figures from Algeria, Angola, Ecuador, Iraq and Nigeria, but the figures provided by several key producers are markedly different from those of the secondary source estimates.

Kuwait told OPEC it had pumped more than 3 million b/d in April, whereas the secondary source estimate was 2.757 million b/d.

Saudi Arabia gave a figure of 10.1 million b/d, some 200,000 b/d higher than the secondary source estimate of just under 9.9 million b/d.

Venezuela's direct submission of 2.837 million b/d was 460,000 b/d higher than the secondary source estimate.

Iran gave OPEC a figure of 3.758 million b/d for April while the secondary source estimates put Iranian output at 3.196 million b/d, leaving a gap of 562,000 b/d.

OPEC's next meeting, on June 14, will take place just two weeks before European Union and US sanctions targeting Iran's oil exports come into effect. An EU embargo on the import and transportation of Iranian oil comes into force on July 1 while new US sanctions, which will bar from the US financial system the banks of countries which do not significantly cut their purchases of Iranian oil, are scheduled to take effect on June 28.

Japan is the only country among Iran's top customers in Asia to have obtained an exemption from the US sanctions so far, having agreed to cut contract volumes by between 15% and 20% for the year to March 2013.

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