The fundamental forces driving the world oil market were broadly stable in February, due to the familiar pattern of consumption growth in Asia offsetting weaker demand in the West, the Organization of Petroleum Exporting Countries said Friday.
This apparent stability belies political tensions between Iran and the West, over the country’s nuclear program, which pushed the average OPEC oil price to a three-year high late in February. Indeed, the bullish effect of the Iranian standoff is undercut by the negative oil price effect of continued weakening demand in Europe and the U.S., OPEC said in its monthly oil market report.
OPEC left its headline forecasts broadly unchanged from the previous month. It continues to see global oil demand growing by 900,000 barrels a day in 2012 and says the world’s need for its crude oil is stable at 30 million barrels a day. This is equal to the exporter group’s official production ceiling, but 970,000 barrels a day below its February output.
As usual, OPEC shied away from discussing the Iranian situation and instead highlighted economic weakness in Europe as the main uncertainty in the oil market.
Recent data hasn’t been encouraging, it said.
“U.S. oil consumption data for December showed a 4.6% year-on-year contraction, the worst observed since July 2009,” OPEC said. “Preliminary weekly data for January and February 2012 has displayed similar contractions.”
Western Europe’s oil demand declined in January and looks likely to keep falling in coming months, it said. OPEC predicts a contraction of 1.7%, or 240,000 barrels a day, in Western Europe’s oil demand in 2012.
Offsetting this is consumption growth in Asia, driven largely by extra demand in Japan, which shut down almost all of its nuclear reactors following the Fukushima meltdown a year ago.
China also boosted its demand in January by adding 800,000 barrels a day of crude oil and refined products to its commercial and strategic storage, OPEC estimated. Some analysts have speculated that China could absorb into these strategic stores much of the 600,000 barrels a day of Iranian oil imports Europe will ban from July.
Chinese imports of Iranian oil fell by 90,000 barrels a day in January, adding to a 40,000 barrel a day decline from November to December, the report said.
