The Organization of Petroleum Exporting Countries (OPEC) released its monthly Oil Market Report this morning and raised its forecast for demand growth in 2013 to 89.7 million barrels a day, a rise of 800,000 barrels a day from the previous forecast. The cartel said that colder-than-normal temperatures and a better economic outlook gave rise to the increase. Half the increase is assigned to China, where demand has grown for the past four months.
On the supply side of the equation, OPEC forecasts non-cartel supplies to increase by 940,000 barrels a day to an average of 53.92 million barrels a day in 2013. The bulk of the increase is coming from North and South America, while supplies from Europe (primarily the North Sea) are expected to decline.
OPEC production totaled 30.32 million barrels a day in January, with Iraq now the second largest producer in the cartel with just over 3 million barrels a day. OPEC members do not reveal their own production figures, but use instead secondary sources. The cartel forecasts 2013 demand for OPEC crude at 29.8 million barrels a day, a decline of 300,000 barrels a day from 2012 average demand and a drop of 100,000 barrels a day from last month.
Prices are somewhat lower for OPEC’s reference basket of crude, at $109.28 a barrel, down from an average of $111.76 a barrel last year. For the month of January, the OPEC basket is about $2.75 a barrel higher than January 2012. Brent crude is about $2.50 a barrel more than in January 2012, and West Texas intermediate (WTI) is up more than $6.50 a barrel.
Expected improvement in the global economy, coupled with today’s OPEC report, is pushing crude prices higher today. Brent is up about 0.1% and WTI is up about 0.5% at mid-morning.