Cautious optimism in the market as the new year begins

OPEC Bulletin Commentary December 2013

As we enter the new year, there is a mood of cautious optimism in the international oil market.

The second half of 2013 saw increasing stability in the market, which was a reflection of the gradual recovery in the world economy.

With global economic growth in 2014 projected to increase to 3.5 per cent from 2.9 per cent in 2013, world oil demand is forecast to rise by one million barrels/day over the same period. However, this rise is expected to be more than offset by an increase in non-OPEC supply.

Against such a backdrop, the 164th Meeting of the OPEC Conference passed as most people had expected on December 4 — that is, quietly and affirmatively. The Conference maintained the current production level of 30m b/d and, at the same time, repeated Member Countries’ readiness to respond swiftly to developments which could have an adverse impact on an orderly and balanced oil market.

“By maintaining current production, we have taken into consideration the welfare of both producers and consumers,” Secretary General, Abdalla Salem El-Badri, told the press after the meeting.

“At this time, everybody is happy. We do not want to disturb things at the moment. Leave things as they are and let us see what transpires as we head towards June next year,” added El-Badri, whose term of office was extended for an additional year by the Conference.

But there was no room for complacency, he stressed: “At the OPEC Secretariat in Vienna, we are watching the market very carefully — day in, day out. When we see any irregularity in the market fundamentals, we will talk to our Ministers.”

OPEC sees the biggest challenge facing global oil markets in 2014 as global economic uncertainty — in particular the high sovereign debt in the Euro-zone, high unemployment in the developed economies, especially the Euro-zone, and slow growth, coupled with inflation risk, in the emerging economies.

And yet, however this and other challenges may turn out during the year, the important message for now is the relative calm in the oil market today and the cautiously optimistic outlook for the coming months.

This is clearly a healthy message to take into the new year.

We would like to wish all our readers a Happy New Year.

OPEC Bulletin December 2013

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