OPEC sees oil around $70-80 in coming months

LONDON: Oil prices are likely to trade around $70 to $80 a barrel in coming months, supported by improving economic and oil market conditions, said a statement issued by OPEC on Wednesday.

The monthly report from OPEC said the global oil demand would rise by 900,000 barrels per day in 2010, 20,000 bpd higher than previously forecast, but the need for crude from its members would fall from the previous year.

“Current conditions in the world economy and the very comfortable outlook for oil market fundamentals are likely to remain supportive for prices to continue to move within this range ($70-$80) over the coming months,” the report said.

The report referred to solid recent manufacturing, employment and consumer sentiment data out of the U.S. and a more optimistic outlook the Bank of Japan has on that country’s recovery.

OPEC was the last of the three major forecasters to release its monthly report after the International Energy Agency (IEA) on Tuesday and the U.S. Energy Information Administration (EIA) last week.

The IEA, adviser to industrialised economies, was more confident than OPEC on crude consumption, predicting world oil demand would hit a record high this year.

“All the three reports on the demand side have been positive and I think it shows that fundamentals are still improving,” said Amrita Sen, oil analyst at Barclays Capital.

Any additional demand for oil will largely be met by production from members outside OPEC, its report said, as it trimmed its forecast for 2010 demand for its crude by 130,000 bpd, reflecting higher supply from non-OPEC countries.

Non-OPEC 2010 supply would rise by 500,000 bpd from the previous year, an increase of around 90,000 bpd from its forecast last month, mainly due to the higher-than-expected production in the first quarter of this year, the report said.

Supply from the 11 OPEC members subject to output targets, which excludes Iraq, rose in March from the previous month.

OPEC’s compliance with the output targets, therefore, fell to 53 per cent, as compared to 55 per cent in February, according to Reuters calculations based on the data from Wednesday’s report.

The group announced in December 2008 that it would cut production, as prices slumped to below $33 in the global economic crisis.

But with oil now above $80 there is less incentive for the members to comply with quotas.

Oil prices added to earlier gains after the release of the report and U.S. crude was close to $85 by 1217 GMT, from around $80 a month ago.

OPEC said recent strong economic data had increased optimism over the strength of the global recovery, increasing risk appetite and driving rallies across commodities and equities.

“Recently, a steady stream of positive macroeconomic indicators has lifted sentiment about world economic prospects,” OPEC said in its report.

“The more positive sentiment has boosted investment flows into equities and commodities, including oil.” But OPEC said the majority of activity was coming from the emerging markets, particularly in China, which continues to lead the global oil demand growth, supported by massive fiscal stimulus.

Source The News