The Organization of Petroleum Exporting Countries expressed concern over the fragile state of the global economy during their most recent meeting in Vienna. Ministers there said there was uncertainty moving forward to 2013 in the oil markets in large part because of a lack of "clear vision on the economic front." Though the U.S. economy was described as robust, and the Eurozone seen as bottoming out, OPEC revised its economic growth forecast for this year from 3.1 percent to 3.0 percent. Though oil demand is expected to revive because of expected economic growth in 2013, the cartel said it was keeping production ceilings in place because of a projected increase in non-OPEC supply.
OPEC, during its conference in Vienna, declared that the "biggest challenge facing global oil markets" next year was the fragile state of the economy, particularly the troubled state of the Eurozone. On Wednesday, the European Union's statistics office Eurostat said industrial production fell unexpectedly in October, suggesting the European economy is sinking deeper into recession. In the United States, meanwhile, House Speaker John Boehner said there were "serious differences" between his party and the White House over how to address the so-called fiscal cliff, a series of deep budget cuts and steep tax hikes set for year's end.
Nevertheless, OPEC, in its monthly report for December, described U.S. economic growth as "robust," adding the contraction in the European economy may have bottomed out in the third quarter and could even grow by 0.1 percent next year.
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Iraqi Oil Minister Abdul-Kareem Luaibi, however, expressed concern over what he said was the "persistent deceleration" in the global economy since the beginning of the year. OPEC, in its market report, said it was keeping its demand forecast the same at 800,000 barrels per day, though demand was estimated higher for the fourth quarter, again on optimism about the U.S. economy. On oil prices, Luaibi said there's been a steady decline since mid-September.
"This drop has reflected mounting concern about the global economic slowdown, the pessimistic future demand outlook and significant stockbuilds of crude in the United States of America," he said. "Such downward pressures have outweighed supply concern arising from geopolitical factors."
Bullish reports about U.S. oil and natural gas production suggest fundamental changes are in store for world markets, though that shift won't be long term. OPEC said non-member supply growth has been steady at 500,000 bpd in 2012, but should stand at 900,000 bpd for 2013.
That was enough to convince OPEC leaders to maintain their current production level of 30 million bpd. Although world oil demand could increase next year if major economies expand as expected, OPEC said that's likely to be offset by the projected increase in non-OPEC supply. Member states, however, would take whatever steps necessary to ensure oil markets are balanced and prices are reasonable.
"However, this is not the responsibility of OPEC alone," said Luaibi. "If we all wish to benefit from a more orderly oil market, then we should all be prepared to contribute to it."
By. Daniel J. Graeber of Oilprice.com