Balance of Supply and Demand - Aug 05

Source: OPEC_RP050813 8/17/2005, Location: Europe

Forecast for 2005
The supply/demand balance for 2005 remains unchanged with demand for OPEC crude in 2005 forecast at 28.9 mb/d. An upward revision to the first quarter of 2005 estimate of 100,000 b/d was offset by a downward revision to the third quarter of 2005 of roughly the same amount. On a quarterly basis the demand for OPEC crude is estimated at 29.2 mb/d, 27.1 mb/d, 28.8 mb/d and 30.5 mb/d for the first, second, third and fourth quarters.

OPEC crude production averaged 29.5 mb/d in the first quarter of 2005 and 29.9 mb/d in the second, or approximately 300,000 b/d and 2.8 mb/d more than the estimated OPEC crude requirements for these two respective periods. As anticipated and reported in the stock section, such production levels have translated into crude inventory builds in the OECD, particularly in the USA where total oil stocks (commercial + SPR) are at record highs, allowing forward cover to improve to stand close to the last five-year average. In terms of OPEC capacity, taking into account the supply/demand balance, the resulting required OPEC crude production levels and projected production capacity, OPEC’s spare capacity is estimated to average around 7.9% in the second half of 2005, compared to 4.9% in the same period of 2004.

Forecast for 2006
For 2006, the demand for OPEC crude is expected to average 29.2 mb/d, an increase of 300,000 b/d versus 2005. The quarterly distribution shows that the demand for OPEC crude is now expected to be 29.78 mb/d in the first quarter, 27.9 mb/d in the second, 29 mb/d in the third and 29.97 mb/d in the fourth.

In terms of OPEC capacity, in 2006 OPEC capacity is expected to average around 33.4 mb/d, representing an average increase of 710,000 b/d from 2005. Taking into account the supply/demand balance for 2006, the resulting required OPEC crude production levels and the projected production capacity, OPEC’s spare capacity in 2006 is estimated to average around 10% assuming there is no significant improvement in Iraq.


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