Oil price gains could reverse on weak fundamentals - OPEC

11 August 2009 12:23  [Source: ICIS news]

LONDON (ICIS news)--Recent oil price gains could be reversed in the coming months by weak market fundamentals, OPEC said on Tuesday in its monthly report.

Prices rose above $70/bbl in August after the OPEC reference basket price fell in July by 6%, or $3.77/bbl, to reach $64.59/bbl.

Bearish market sentiment turned positive later in July as encouraging corporate earnings reports and a moderation of the economic contraction in the US lifted equities and crude prices.

“Despite this positive price movement, the market is still fundamentally weak. Price movements in the very short to near term will depend largely on economic developments,” said OPEC.

“Due to ample product stocks, the current sentiment is expected to soften further with the approaching end of the driving season. This could negatively impact crude fundamentals in the coming months,” the organisation added.

OPEC repeated for the third month running its forecast that world oil demand would decline by 1.6m bbl/day in 2009 to 83.8m bbl/day.

The unchanged forecast was because the massive reduction in oil consumption from the US had been offset by increases elsewhere, particularly in China and India, the organisation said.

The decline in 2009 would be followed by an increase of 500,000 bbl/day in 2010, driven mainly by non-Organisation for Economic Co-operation and Development countries (OECD), according to the report.

OPEC crude oil production averaged 28.68m bbl/day in July, an increase of 160,000 bbl/day from June, with most of the increase coming from Angola, Iraq and Saudi Arabia, the report said.

Non-OPEC supply was forecast to grow by 300,000 bbl/day in 2009, an increase of 100,000 bbl/day on the previous assessment. This was due to higher-than-expected supply from Russia, the report said.

Based in Vienna, the 12-member OPEC is a cartel comprising Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

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By: Alex Davis
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