World Economy Progress Supports Oil Prices in 2010.
Recovery of world recovery will support oil prices during the current year according to the latest Monthly Oil Market Report published by OPEC. The oil producers cartel estimates that world economy continues to show some improvement and global GDP is now expected to grow at an upwardly revised 3.4% in 2010 after contracting by 0.9% in 2009. The main contribution for this growth is coming from developing Asia, with China seen growing by 9.1% in 2010, while India is forecast to grow by 7.0% in 2010. The OECD in comparison is forecast to grow on a much lower level of 1.7%. The US is now expected to contribute the most within the OECD at 2.5% in 2010.
Growth in 2010 continues to be challenged by concerns about the level of public debt in almost all OECD regions, still record high unemployment levels across the globe and government efforts in China to prevent the economy from overheating.
World oil demand growth in 2009 remained broadly unchanged from the previous report with a contraction of 1.4 mb/d. For 2010, global demand is projected to grow by 0.8 mb/d, in line with the previous forecast as the whole picture of economy has not changed significantly. The slower pace of recovery in US demand, despite positive economic signals, is a key uncertainty for oil demand growth this year. Non-OECD regions will be the sole contributors to global demand growth in 2010.
At the same time, non-OPEC supply is expected to have increased by 0.6 mb/d in 2009, following a slight downward revision, mainly due to changes to historical data and some adjustment to actual fourth quarter production data. In 2010, non-OPEC oil supply is forecast to increase by 0.3 mb/d following a minor downward adjustment, but this is estimated that will not push oil prices in lower leveles. In January, total OPEC crude oil production averaged 29.19 mb/d, according to secondary sources, representing an increase of 63 tb/d from the previous month.
Although high oil prices hurt maritime industry, strong oil demand have risen tanker market freight rates. The bullishness of the tanker market continued in January and spot freight rates have increased on all routes. The correction in rates was driven by changes to world scale flat rate as well as increased activities. OPEC spot fixtures increased a further 1.2 mb/d in January to average 12.7 mb/d, which corresponds to almost two-thirds of total spot fixtures. OPEC sailings fell a minor 0.1 mb to 22.9 mb, according to preliminary estimates.
In the front of inventories, the news are not so supportive for oil prices, but oil traders prefer to focus on economic conditions and the pace of recovery rather to oil market"s fundamentals. US commercial oil inventories fell by 3.0 mb in January to 1,046 mb, but the drop was far below the seasonal draw. This decline was driven by products which outpaced the build in crude oil inventories. US commercial oil inventories are 32 mb above a year ago and 61 mb above the five year average. In December, commercial oil inventories in Japan fell by 3.6 mb to total of 164.2 mb.
This represents around 25 mb below both a year earlier and the average for the last five years. This draw is attributed to total products as crude inventories saw some gains. Preliminary indications show that at end of January, Japan"s commercial oil inventories rose by 4.8 mb to The build was split between crude and products.
The demand for OPEC crude in 2009 is estimated at 28.8 mb/d around 130 tb/d higher than in the previous report. This still represents a decline around 2.2 mb/d compared to 2008. In 2010, the demand from OPEC crude is expected to average 28.8 mb/d, about 150 tb/d above the previous assessment and almost unchanged from a year earlier.