Oil Price Tumbles After OPEC Releases 2015 Forecast - the demand for oil in 2015 will drop to its lowest level since 2002
5 January 2015, 18:11
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The
demand for oil in 2015 will drop to its lowest level since 2002 because
of an oversupply of crude and stagnant economies in China and Europe,
according to OPEC's latest forecast. And that's just one of several sour
estimates.
OPEC's monthly report said demand for the cartel's oil will fall to 28.9 million barrels per day next year, 280,000 barrels lower than its previous forecast and the lowest in 12 years. Add to that a new report from the US government's Energy Information Administration (EIA), which also cut its 2015 forecast for growth in global oil demand by 240,000 barrels per day, down to 880,000 barrels per day.
"There is a growing realization that the first half of next year is going to look very weak," Gareth Lewis-Davies, a strategist at the Paris-based bank BNP Paribas, told Reuters. "You start to price that in now."
"Almost all the news flow points to a weaker market," said one oil analyst, Carsten Fritsch of Commerzbank in Frankfurt. "We have had very bearish API data with large stock builds across the board, and also a very bearish Short-Term Energy Outlook from the EIA, with a sharp reduction in demand growth forecasts for next year."
Abhishek Deshpande, an oil market analyst at Natixis, agreed. "The fundamentals outlined in the report look quite bearish," he said. "Fiscal balances are a huge problem for weaker OPEC members, so I won't be surprised if they call for an emergency meeting [to adjust production levels] early next year."
In fact this year's price plunge hasn't hurt just the weaker OPEC members. Bloomberg reports that oil prices now are too low for 10 of its 12 members to balance their governments' budgets. The exceptions, the news agency reports, are Kuwait and Qatar. Saudi Arabia may be losing money on oil at the moment, the news agency says, but its treasury has nearly three-quarters of a trillion dollars in reserve.
OPEC's monthly report said demand for the cartel's oil will fall to 28.9 million barrels per day next year, 280,000 barrels lower than its previous forecast and the lowest in 12 years. Add to that a new report from the US government's Energy Information Administration (EIA), which also cut its 2015 forecast for growth in global oil demand by 240,000 barrels per day, down to 880,000 barrels per day.
"There is a growing realization that the first half of next year is going to look very weak," Gareth Lewis-Davies, a strategist at the Paris-based bank BNP Paribas, told Reuters. "You start to price that in now."
"Almost all the news flow points to a weaker market," said one oil analyst, Carsten Fritsch of Commerzbank in Frankfurt. "We have had very bearish API data with large stock builds across the board, and also a very bearish Short-Term Energy Outlook from the EIA, with a sharp reduction in demand growth forecasts for next year."
Abhishek Deshpande, an oil market analyst at Natixis, agreed. "The fundamentals outlined in the report look quite bearish," he said. "Fiscal balances are a huge problem for weaker OPEC members, so I won't be surprised if they call for an emergency meeting [to adjust production levels] early next year."
In fact this year's price plunge hasn't hurt just the weaker OPEC members. Bloomberg reports that oil prices now are too low for 10 of its 12 members to balance their governments' budgets. The exceptions, the news agency reports, are Kuwait and Qatar. Saudi Arabia may be losing money on oil at the moment, the news agency says, but its treasury has nearly three-quarters of a trillion dollars in reserve.
