Guessing on what OPEC could do in the future is a dangerous exercise in that it may turnout to be exact opposite. But out here, the views of Barclays and OPEC may be juxtaposed to gleam into the future. And we see some convergence by doing so.Barclays analysing the crude oil fundamentals have observed that OPEC may produce close to its traget of 30 mb/d of oil up to July and would slowly ramp up the production to meet “higher call on its crude in Q3 and Q4”. OPEC had convened a conference in Vienna which decided that member countries should adhere to the existing production ceiling of 30.0 mb/d.
While world economic growth was projected to reach 3.2% in 2013, up from 3% in 2012, downside risks to the global economy, especially in the OECD region, remain unchecked, the conference said.
It noted that the relative steadiness of prices during 2013 to-date was an indication that the market was adequately supplied and the periodic price fluctuations are a reflection of geopolitical tensions.
The conference noted, moreover, that, while world oil demand is expected to rise from 88.9 million barrels a day in 2012 to 89.7 mb/d in 2013, driven almost entirely by the non-OECD regions, non-OPEC supply is projected to grow by 1.0 mb/d, and that OECD stock levels remain comfortable.
Taking these developments into account, the second half of the year could see a further easing in fundamentals, despite seasonally-higher demand, it said.
Q3 and Q4 forms the second half of this year: OPEC says that fundamentals may ease for the second half of this year which means supply side would turn out to be robust. Seasonally-higher demand is also anticipated by the OPEC. Meanwhile Barclays expects, “higher call on its crude in Q3 and Q4” would make OPEC to ramp up production slowly. The supply would be fine just like the demand and as a result the prices could be stable, ie, if one goes by this limited metric.
In yet another crude oil related news, the South Korean crude oil demand is expected to get a boost as 10 out of a total of 23 nuclear plants have been shut down in the country.
The country's current reliance on power generation is skewed to support Coal (which meets 40% of power generation share) and LNG (25% of power generation share). Crude oil just meets 3%.
Source: Barclays