But despite all the attention being given to the parlous
state of many western economies, fundamental market tightness
lies behind the apparently paradoxical sustained high crude
prices we have seen, according to the International Energy
Agency.
In its September oil market report, the IEA said demand had been
outpacing supply since the middle of 2010, leading to a
depletion of stocks. In the second half of last year the supply
shortfall was around 1.4 million b/d, while in the first six
months of this year the deficit was closer to 500,000 b/d.
At the end of this period, OECD oil stocks in July 2011 dipped
below the average level over the last five years for the first
time since June 2008, the IEA said. This situation continued in
August, when an estimated stock build of 600,000 barrels fell
well short of the normal increase for the month of 14 million
barrels, despite the release onto the market of oil from
emergency stockpiles of IEA member countries. This tightness now
looks set to ease, the IEA said.
With demand forecasts being revised down as a result of the
increasingly gloomy economic outlook, the IEA expects the call
on OPEC crude--which broadly measures the amount of oil the
cartel's members would have to pump in order to balance supply
and demand--to fall too.
Demand for OPEC crude in the fourth quarter of this year and the
first quarter of 2012 is now estimated at around 30.5 million
b/d, not much higher than the group's current production.
Adding in more hypothetical factors, such as the partial return
of Libyan oil to the market or any further downgrade to oil
demand estimates, would point even more strongly to an easing of
market tightness in the coming months.
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