Oil prices jumped dramatically this week largely based on a lower dollar. Starting on Tuesday at around $68 a barrel, oil was trading close to $72 by Thursday morning after the International Energy Agency released its monthly report predicting that the demand for oil will begin rising soon.
As expected, OPEC held its production quotas steady expressing satisfaction with current prices. Saudi Oil Minister al Naimi said he expects that economic growth will soon push prices higher, but does not expect prices to spike to the $150 dollar level as happened in 2008. OPEC professes not to be worried about high stockpile levels saying the situation will take care of itself when the global economy rebounds. Only Saudi Arabia, Qatar and Kuwait adhered to their quota last month while Iran, Venezuela and Angola were well over quota. Since earlier this year, OPEC has increased production by 750,000 b/d while prices continued to rise.
The weekly stocks report shows crude inventories falling by 5.9 million barrels on increased demand and lower imports. Total demand for oil products is up by 2.0 percent over last year. Gasoline demand which is up 2.2 percent over last year was the strongest but the demand for distillates and jet fuel appears to be higher than a few months ago.
The September OMR forecasts that oil demand will increase by 500,000 b/d for the remainder of 2009 and again in 2010. Global oil production for August was down by 400,000 b/d on lower non-OPEC production, but OPEC continues to forge ahead, producing 1.4 million b/d over quota. Overall, world demand is seen as being 1.4 million b/d lower than last year.
In general, the Agency sees demand growing in North America, China, and parts of Asia. However, It warned that some of the perceived demand may be from Chinese stockpile building and not from consumers. In addition, there is considerable uncertainty about the future growth of demand in the US.