OPEC members may boost oil supply this year as demand for crude rises amid a recovery in economic growth rates to near levels last seen before the global financial crisis, Saudi Arabia’s oil minister said.
Worldwide oil demand may increase as much as 1.8 million barrels a day in 2011, or 2 percent from last year, Ali al-Naimi said in a speech in Riyadh today. Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries, will have spare production capacity of about 4 million barrels a day, he said.
“OPEC’s policy, as is well known, is to meet any increase in oil demand to maintain the supply-demand balance,” he said. “Some OPEC countries will increase their production capacities, thus maintaining OPEC’s spare capacity at approximately 6 million barrels per day.”
Crude for February fell to its lowest in two weeks on the New York Mercantile Exchange, dropping as much of $1.71, or 1.9 percent, to $87.40 a barrel.
The International Energy Agency last week raised its 2011 global crude oil demand forecast for a fourth month as the economic recovery gathers momentum. Worldwide oil consumption will rise by 1.4 million barrels a day, or 1.6 percent, to 89.1 million a day, the IEA, an energy consultant to industrialized nations said in its monthly report.
Data from OPEC and IEA on oil demand levels may differ depending on the assumptions each group uses for economic expansion and for previous use.
Call on OPEC
OPEC, which accounts for about 40 percent of global supply, will need to increase exports by 300,000 barrels a day to 29.9 million a day this year to meet global demand, the IEA said. This “call on OPEC,” or the difference between global demand and production in countries outside the 12-member group, is 400,000 barrels a day higher than last month’s estimate.
Asked whether OPEC would raise output if crude prices reach $100 a barrel, al-Naimi responded: “The future is the future.” He said he was “optimistic” about global energy markets and that oil prices would be stable.
“The market this year will be in total equilibrium,” al-Naimi said. “I expect stability to continue at last years’ rates.” Al-Naimi didn’t specify at what level of demand OPEC might increase production.
Increased supply “ultimately accelerates the draw on OPEC spare capacity,” analysts at Goldman Sachs Group Inc. led by Jeff Currie in London said. “The market may already have moved into the second stage of its cyclical recovery on the road to a structural bull market in oil.”
Prices May Decline
The demand forecast from al-Naimi signals that Saudi Arabia sees little concern in raising supplies and that there continues to be short-term risk that oil prices may decline, JPMorgan Chase & Co. analysts led by Lawrence Eagles in New York said in a note to clients.
Saudi Arabia led OPEC members in agreeing to cut oil output at the end of 2008 after crude prices slumped from a record in the wake of the global financial crisis. OPEC’s compliance with the record cuts dropped last month as the group boosted output to the highest level since December 2008, the IEA said.
The 11 members bound by quotas produced 27.15 million barrels a day last month, implying compliance of 45 percent, according to the IEA.
Oil shipments from OPEC member states to emerging economies is nearing the level of purchases made by the world’s industrialized economies, with developing countries potentially surpassing their longer-established peers by 2013, al-Naimi said. That switch in demand would mark a first in the oil industry, he said.