U.S. May Cut Oil Demand View
Source: Reuters, Tom Doggett (6/6/11)
"The move may be a double-edged sword, stoking OPEC's argument."
High fuel prices and weak U.S. economic numbers could prompt the U.S. government's energy forecasting agency to cut its global oil demand estimate for the second month running, a move that may stoke already contentious debate within OPEC over raising oil output.
While the U.S. Energy Information Administration's monthly energy outlook on Tuesday is unlikely to sway the outcome of Wednesday's OPEC meeting, it will be the most up-to-date set of supply and demand data that ministers will consider.
"I would look for another small to moderate trimming in global oil demand expectations in the neighborhood of 100,000 barrels per day," Guy Caruso, former head of the EIA and current energy analyst at the Center for Strategic and International Studies, said about the EIA's forecast.
That may be a double-edged sword.
For OPEC hawks who oppose an output rise, reduced demand could be reason to hold back; for Saudi Arabia and its Gulf allies pushing for an output rise, signs of a faltering economic recovery are a key reason for pumping up output.
In last month's forecast, the EIA reduced its estimate for global oil demand growth this year by 120,000 barrels per day to 1.4 million bpd, the biggest cut in 10 months. But OPEC made no change, leaving its forecast in sync with the EIA; the International Energy Agency pared slightly to 1.3 million bpd.
OPEC's new monthly forecast will be issued this Friday, followed by the IEA's outlook June 16.
While oil demand is seen strong in India and China, recent bad U.S. economic news suggests the American economy could be slowing. The U.S. created only 54,000 jobs in May, about one-third of what had been expected, and consumer spending and manufacturing figures have disappointed.