OPEC focuses on market stability in 2013

OPEC Bulletin Commentary October-December 2012

When OPEC's Oil/Energy Ministers gathered in Vienna for the 162nd Meeting of the Conference on December 12, they were faced with the challenge of addressing an uncertain outlook for the international oil market in 2013.

This in turn was tied in to the stuttering performance of the world economy, which the latest OPEC Monthly Oil Market Report (MOMR), on the eve of the meeting, described as experiencing "another year of deceleration" in 2012, before adding a positive note: "Some indicators are pointing to a tentative recovery in the second half of the year and this momentum is likely to be carried over into 2013."

Then there was a word of caution: "Many uncertainties remain. The most important will be avoiding the fiscal cliff in the US, further decisions on austerity issues in the Euro-zone, and balancing the need to reduce the fiscal debt burden while stimulating growth in Japan. In the emerging economies, it remains to be seen how domestic demand will be improved, given the likely continuation of low growth in their main exporting markets in the developed world."

Such doubts about the global economy, the MOMR added, were "causing a great deal of uncertainty for the forecast for world oil demand, which has a downward risk, especially in the first half of the year." Turning to supply, the report noted that the growth in non-OPEC supply, together with OPEC natural gas liquids and non-conventional oils, was expected to outpace the increase in world oil demand growth in 2013. Indeed, this was already happening, with some notable downward pressure on oil prices since mid-September.

This provided the backdrop for the Ministers as the 162nd Meeting began. In the closing press release, the Conference was emphatic that the biggest challenge facing global oil markets in 2013 was uncertainty surrounding the global economy, at the same time noting that projected demand for OPEC crude in 2013 was expected to contract to 29.7 million barrels/day. Accordingly, the Conference had decided to maintain the current production level of 30.0m b/d. However, it added the important rider that Member Countries would, if necessary, take steps to ensure market balance and reasonable price levels for producers and consumers. This would mean responding swiftly to developments that might have a detrimental impact on an orderly oil market. The Conference also directed the Secretariat to continue monitoring closely supply and demand, as well as non-fundamental factors, so as to keep Member Countries abreast of developments at all times.

The Meeting, which also extended Secretary General Abdalla Salem El-Badri's term of office for one year, effectively brought to an end a busy year for the Organization which, as ever, remains committed to achieving oil market stability in support of steady world economic growth.

Following a winding down of activity across much of the world for the festive season around the turn of the year, in the northern hemisphere, the days will continue getting shorter for about a week and the weather may even turn colder and bleaker.

But then a transformation in the general mood is likely to occur.

As we settle into the New Year, the promise of a warmer, brighter spring soon becomes apparent, even though there may still be lots of wintry weather to come in the meantime. People will have benefitted from the long festive break itself when they had the chance to relax with family and friends.

The result of all this is that, as the pace of life picks up again in early January, it will do so with a newfound freshness and vigour in the minds and bodies of many people. This will energise them in their day-to-day tasks at home and at work.

The challenges facing the oil industry may not change much as one year passes into the next, but, at the same time, there will be a new drive and spirit among many people who must handle them. It is, in effect, opening a new chapter, with all the promise this can hold.

It is with this mood of optimism that we send seasonal greetings to all our readers, as we all look forward to peace and prosperity in 2013, supported by a sound, stable international oil market.

OPEC Bulletin Oct-Dec. 2012

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