IEA Takes Aim At OPEC

Jim Brown
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In the IEA's monthly oil market report the IEA called on OPEC to raise production levels or be responsible for another recession. OPEC fired back claiming the IEA numbers were wrong.

The IEA upgraded their projected demand estimates for 2010 and 2011 by +320,000 bpd above they levels they predicted just a month ago. The reason for the big jump is the latest figures from the U.S. and China on Q4 demand. China's demand rose to an all time high in November of 10.2 mbpd. That was a 15.1% growth over the prior November. China imported an average of 4.8 mbpd in 2010, an increase of 17.5% over 2009 levels.

The IEA claims global demand in 2010 rose by 2.7 mbpd to 87.7 mbpd. They believe it will rise another 1.4 mbpd in 2011 to 89.1 mbpd. The IEA said "the economic recovery has been more pronounced than expected."

The IEA claimed OPEC must be alarmed by the rise in prices but as I have reported in these pages several of the OPEC member countries are hoping to see $100 soon. They basically pleaded with OPEC to put more oil on the market or risk a global meltdown. They warned that oil at $100 would subtract -5% from global GDP.

OPEC also raised its demand estimates last week but remains below the IEA numbers. In an OpEd to the Wall street Journal OPEC secretary General Abdalla Salem el-Badri insisted stockpiles of oil and OPEC spare capacity remain robust.

"Any assumption there is tightness in the global market is incorrect" according to el-Badri. "There is more than enough oil on the market." El-Badri repeated the OPEC claims that speculation and the weak dollar is pushing prices higher not demand. "The IEA must be consistent in their remarks. Supplying the world's media with unrealistic assumptions and forecasts will serve only to confuse matters and create unnecessary fear in the markets" according to El-Badri.

While I don't trust OPEC at all I have a hard time trusting the IEA as well. Their very comfortable life as consultant to the 28 OECD nations on energy could be in jeopardy if they continue missing the boat on production and demand. They need a big event to put them back into the picture as knowledgeable players. They may be trying to manufacturer one with their fight with OPEC.

OPEC and the IEA have never been friends. The IEA was started as a counter to OPEC after the oil embargo in the late 70s. It was thought by limiting OPEC's influence on the demand and production numbers the world would get a better handle on exactly where it stood. Instead the two groups constantly take shots at each other. Both have a vested interest in their position so I don't believe either.

BP also publicized their long-term energy market projections for the first time this week. BP said "huge growth in OPEC production will be needed to satisfy demand in the near future.

Jim Brown

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