U.S. sees tighter oil market; OPEC disagrees

NEW YORK/LONDON Tue Sep 11, 2012 5:59pm EDT

NEW YORK/LONDON (Reuters) - The U.S. government and OPEC offered differing outlooks for global oil markets on Tuesday, with Washington ratcheting up price forecasts for oil on stronger demand while OPEC highlighted rising output from the exporter group.

In separate monthly reports, both emphasized the possibility that a worsening European crisis could still drag down oil prices, warnings that may complicate deliberations over whether to tap into strategic oil reserves again.

The Organization of the Petroleum Exporting Countries, which pumps around a third of the world's oil, said it was supplying the market with enough crude. A day earlier, top producer Saudi Arabia made similar remarks. Those comments were seen as cautioning consumer nations against a release of emergency reserves.

OPEC's production rose by about 260,000 barrels per day (bpd) in August, amid a European Union embargo on Iran's exports, due to higher output from other members of the 12-member group. OPEC made no major changes in its supply and demand forecasts.

The U.S. government's Energy Information Administration (EIA) said oil demand would grow faster than it predicted a month ago, while oil production outside of OPEC would be lower.

It said Brent crude oil prices would average about $111 in the last four months of the year and it raised its full-year price for both 2012 and 2013 by around 3 percent from last month's report to $112 and $103, respectively.

While that outlook could bolster the argument that the United States and other consumer nations should consider tapping strategic oil stocks to try and lower prices and shore up struggling economies, the EIA also maintained its broader view that prices would slowly decline.

"(The) EIA expects Brent crude oil to fall from recent highs over the rest of 2012," the administration's monthly Short-Term Energy Outlook said. Brent has jumped by 25 percent since June to around $115 a barrel.

"The possibility of a deteriorating economic situation in the countries of the European Union and slowing growth in China adds significant downside risk to future prices... EIA expects stock builds during 2013, reflecting a looser oil market over that time period."

The International Energy Agency, the advisor to 28 industrialized nations on energy policy, releases its report on Wednesday.

OPEC SENDS SIGNALS

Analyst Sam Ciszuk of UK-based consultant KBC Energy Economics said OPEC's report signaled the group's dislike of any use of emergency stocks, such as the U.S. Strategic Petroleum Reserve (SPR).

"OPEC itself is never really happy with SPR releases," Ciszuk said. "Our view is also that supply is sufficient for the moment. When you look at the stocks situation, it is not problematic."

The monthly reports from OPEC and the U.S. government's EIA will be followed on Wednesday by the latest outlook from the International Energy Agency, .

The IEA normally coordinates strategic stock releases by member states, though some analysts think the United States could act unilaterally or in concert with individual members if widespread agreement on a move cannot be reached.

Brent crude oil closed at $115.40 on Tuesday, up 59 cents on the day and more than $25 above its year low hit on June 22 of $89.49 a barrel.

SUPPLY AND DEMAND

The EIA slightly raised its estimates for global demand growth for both this year and next in its latest report, forecasting world consumption would rise by 840,000 million bpd this year, an increase of 80,000 bpd from last month.

It sees demand rising by a further 1 million bpd to average 90.1 million bpd next year, an increase of 130,000 bpd from last month's estimate. But it said that production from countries outside OPEC is expected to increase enough to meet demand.

Non-OPEC supply is expected to rise by 510,000 bpd this year and 1.24 million bpd next, with total non-OPEC supply in 2013 seen at 53.73 million bpd.

Citing secondary sources, OPEC said its production rose to 31.41 million bpd in August from 31.15 million in July. Iranian supply last month was 2.77 million bpd, versus 2.78 million in July.

Iranian output has fallen sharply this year because of European and U.S. sanctions over its disputed nuclear program. The EU embargo bars EU insurance firms from covering Iran's exports, which has hindered imports by non-EU buyers.

The OPEC report adds to earlier indications that the drop in Iranian oil shipments may be bottoming as some non-EU buyers find ways around the insurance ban. In Japan, government-backed shipping coverage has encouraged purchases, industry sources say.

Output also declined in OPEC's top producer, Saudi Arabia, which told OPEC it had trimmed supply by 50,000 bpd to 9.75 million bpd in August. An August 30 Reuters survey also said Saudi supply dropped by that amount.

OPEC now expects demand for its crude to average 29.55 million bpd in 2013 - unchanged from last month and significantly less than it is pumping at present.

Also in the report, OPEC left its forecast for the growth in world oil demand next year unchanged at 810,000 bpd and repeated the view from last month's report that oil use could undershoot the estimate by 20 percent.

"The economic picture is vague and there are plenty of potential uncertainties going forward," OPEC said. "Downside risks exist as the spillover from the slowing global economy could reach some regions of the non-OECD."

The OECD is the Organisation for Economic Cooperation and Development, which has 34 member countries including the United States.

(Reporting By David Sheppard in New York and Alex Lawler in London; Editing by Bob Burgdorfer)

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