OPEC Sees Oil Demand Rising
LONDON — An economic rebound in Europe and the U.S. is boosting oil demand beyond previous expectations, OPEC said Wednesday, but it warned that turmoil in emerging markets could pose a risk to the positive outlook.
In its closely watched monthly oil-market report, the Organization of the Petroleum Exporting Countries upgraded its forecasts of oil-demand growth this year by 50,000 barrels a day—making it a rise of 1.1 million barrels daily to 90.98 million barrels a day. The group—which produces over a third of the barrels consumed globally each day—cited improving economies in the European Union and the U.S. for its predicted rise in demand and said the forecasts could be adjusted upward if the trend continues.
But OPEC also warned that economic uncertainty in emerging markets such as Argentina cast a cloud over the forecasts—adding to concerns already voiced by European and U.S. multinational companies in recent weeks. “Downside risks still remain from fiscal issues in some [non-industrialized] countries,” the group said in its report, citing fiscal and monetary issues in Asia and Latin America.
Last month, a sudden drop in the Argentine peso—after the central bank stopped shoring it up—led to a broad selloff in emerging market currencies. OPEC said trouble in Buenos Aires could “also negatively influence Brazil as an important trade partner if it remains unsolved for a longer period.” This month, Brazil—which is South America’s largest economy—has already said industrial production contracted 3.5% in December compared with the previous month, its worst performance for the month since 2008.
The oil-producers’ group also cited risks of lower-than-expected oil demand in India—which, along with China, has been the engine of global oil consumption growth—and other Asian economies because of tepid economic growth. This month, the Reserve Bank of India downgraded its outlook on growth, predicting it would fall short of its earlier projection of 5% for the current fiscal year. Budget deficits in particular could force Asian governments to curb fuel subsidies, OPEC said.
– WALLSTREET JOURNAL