Healthy production levels by Opec will help balance oil markets next year as demand growth slows, the West's energy watchdog and Opec said on Tuesday, a day ahead of a policy-setting meeting by the producer group. The International Energy Agency said the Organisation of the Petroleum Exporting Countries had raised output to its highest level in more than three years, and the oil producer group said it was now pumping more than might be required next year.
"Our base case is seeing a relatively balanced market next year if Opec continues to produce at the levels they have been producing at over the last three or four months," said David Fyfe, head of the oil industry and markets division of the IEA. Opec meets on Wednesday in Vienna to agree on output from its members, which pump more than a third of the world's oil, and is expected to aim for a production target of around 30 million barrels per day (bpd).
The IEA and Opec clashed in June when the IEA predicted a steep rise in demand and called on Opec to help replace lost Libyan output in order to prevent oil prices from spiking further and damaging the global economy. Opec rejected the pressure and failed to agree on new output targets, which led the IEA to release stocks and further anger Opec.
Saudi Arabia unilaterally raised production and was pumping at the highest level for 30 years in November, while the IEA has meanwhile repeatedly cut estimates for the global demand in 2012 as Europe's debt crisis has worsened. "We think that the market for 2011 and 2012 now looks tight to balanced, and there is the prospect of it easing somewhat after that," Fyfe said.
The IEA said its average call on Opec crude for the first half of 2012 should stand at 29.35 million bpd versus 30.68 million bpd produced in November, which was a rise of 620,000 bpd on the back of higher Libyan and Saudi output. "Overall, the IEA sees a fairly rosy supply side, which should be able to keep pace with demand growth by and large in the coming years, with limited spare capacity and inventory buffers in operation," said analysts from Barclays Capital.