OPEC has warned of further oil-price volatility as it raised its forecast for global oil demand for the third consecutive month. Record bets placed by "market speculators" on rising crude prices could end months of relative market stability, jeopardising the economic lifeblood of oil-exporting countries, Hassan Qabazard, the head of OPEC's research division, told a meeting of Arab oil ministers in Doha yesterday.
"Speculators have taken net long positions to a record high. There is understandably concern whether this could trigger a new wave of market volatility at a time when steps to regulate markets are still under discussion," Mr Qabazard said. Stable crude prices are at the top of the organisation's wish list after record price swings during 2008 and the early months of last year. Crude has been trading between US$75 and $85 a barrel for most of this year, a range that Mr Qabazard said was enough to stimulate investment in oil development while still being "affordable" for consumers.
Nevertheless, there was no room for complacency about the generally "more settled air" surrounding oil markets, he added. Crude fell by 13 per cent last week, sliding from $87 to $75 a barrel as the Greek financial crisis sent the euro sharply lower, making oil more expensive for holders of the European currency. "This strong volatility came despite the fact that crude fundamentals remain relatively unchanged and thus highlight the continued impact of financial market sentiment on crude oil prices," the OPEC secretariat said in its latest monthly oil market report, published yesterday.
But on Monday, the OPEC secretary general Abdalla el Badri and several OPEC ministers in Doha predicted that a $1 trillion (Dh3.67tn) emergency fund aimed at stabilising markets and containing the Greek crisis would bolster crude prices. Crude rebounded yesterday to more than $77 a barrel in early trading in New York as the Greek rescue package calmed risk aversion and helped restore confidence that oil demand would continue to strengthen this year.
The OPEC report predicted oil demand this year would grow more than previously expected, due to continued expansion of China's resilient economy. The group forecast demand rising by 950,000 barrels per day (bpd) this year, or 50,000 bpd more than it had projected a month ago. "Overall, the recent signs of improvement in the global economy have been encouraging," OPEC said. But it refrained from changing its 3.5 per cent projection for global economic growth this year, breaking ranks with the IMF, which last month raised its forecast to 4.2 per cent.
OPEC also warned that the transport sector, which accounts for almost half of global oil consumption, was "heading toward turbulence". Governments' stimulus programmes were artificially supporting the sector and forcing up demand for petrol and diesel, it argued. "Any strong and lasting increase in pump prices will certainly dent demand, not only in the US but also across the globe," the group said.
Other threats to the world economy that could destabilise oil markets included high levels of sovereign debt and persistently high unemployment in developed countries. The risk that China's economy could overheat is also said to be a threat. firstname.lastname@example.org