OPEC concern about future demand

Tamsin Carlisle

• Last Updated: November 16. 2009 8:25PM UAE / November 16. 2009 4:25PM GMT

The president of OPEC has expressed concern about future oil demand and the cost of maintaining spare output capacity as consumers look for cleaner fuels.

An unforeseen drop in demand during the global recession has led to a huge overhang of idle oil wells, especially in the Gulf.

“What concerns us in OPEC is security of demand. We firmly believe it should be given the same weight as security of supply,” said Jose Botelho de Vasconcelos in Abu Dhabi yesterday in a speech on energy security. “Producers cannot afford to invest in capacity that will not be used. It is an expensive business to invest in idle capacity.

“We have been sad to hear recent calls by some influential parties in richer nations to reduce dependence on imported oil.”

Just weeks before a December 22 OPEC meeting in the Angolan capital Luanda, he urged the governments of energy-consuming countries to develop measures to ensure greater transparency over oil use and inventories and more consistency in policies.

“There is too much uncertainty in the market over such matters as future world economic growth levels, consuming-country policies and technology,” said Mr Botelho de Vasconcelos, who is also the oil minister of Angola. “This makes it almost impossible to devise effective investment strategies for future production capacity to meet forecast rising levels of demand.”

OPEC expects oil demand to rise 23 per cent to 106 million barrels per day (bpd) in 2030 from about 86 million bpd last year. Those projections may turn out to be vastly different from reality over time, Mr Botelho de Vasconcelos said.

Energy economists have long laid part of the blame for price volatility on the reluctance of some OPEC members to supply reliable data on crude production and reserves.

But problems with Chinese energy data have taken the spotlight of late. The International Energy Agency, which advises developed countries on energy issues, has been especially vocal in criticising Beijing for its decision this summer to stop publishing figures on the oil inventories it holds. China is the world’s second-biggest energy consumer after the US.

Because of an unclear outlook for the oil market and the global economic recovery, Mr Botelho de Vasconcelos said it was too early to predict whether OPEC would need to adjust its output targets next month.

Mr Botelho de Vasconcelos said he was “happy” with oil prices between $75 and $80 per barrel, a level he felt would allow economic recovery..



tcarlisle@thenational.ae