Oil Scene

Another year has whizzed by and what an exceptional year it has been!

With bulls reigning, crude prices registered extreme fluctuations of almost $20 a barrel during the year but oil producers had little concerns. Output quota constraints were minimal, rather nonexisting. Firm markets, with prices scaling previously untouched heights, though still behind the absolute real peaks reached in 1980, oil producers registered exceptional budget surpluses. Rising supplies and easing regional, geopolitical tensions though forced shifting emphasis in the later half of the year, on market fundamentals, leading to a sharp correction in prices

Another interesting feature of the crude markets last year was continued robust global economic growth. However, this was not matched by corresponding growth in oil demand. Conservation finally seemed to be playing its role. A particularly mild winter, rising prices and the removal of subsidies in some developing countries, dampened oil demand growth, resulting in progressive downward revisions in demand forecasts as the year unfolded.

According to the OPEC, the global oil demand growth during 2006 expanded by 1.2 percent or 1.0 million bpd to average 84.3 million bpd, representing a downward revision of 0.5 million bpd from the initial forecast of 1.5 million bpd. According to the IEA the global oil product demand in 2006 remained unchanged at 84.5 million bpd from its earlier forecast and would be 85.9 million bpd in 2007 (+1.7 percent). The 2007 forecast though faces downside risks, due to the uncertainties surrounding the US economy, the IEA insists. China’s 2006 demand growth rate has also now been revised down to 5.6 percent given weak apparent demand over the past three months.

MENAFN