The decision by the Organization of Petroleum Exporting Countries last Nov. 22 to maintain oil production quotas through 1995 should boost prices next year.
But current warm weather has slackened demand, reducing prices.
London's Centre for Global Energy Studies (CGES) expects worldwide oil demand to grow 2.1% in 1995 compared with 1994, although any upward move in prices is likely to be tempered by increasing non-OPEC oil production.
"Oil prices have fallen sharply over the last month as mild weather delayed the normal seasonal upturn in demand," CGES said. At the close of business Nov. 25, Brent crude oil for January stood at $17.16/bbl. By the end of trading Dec. 19, February delivery Brent had fallen to $15.93/bbl.
"Product prices led the way down, squeezing margins and depressing crude prices as refiners suddenly stopped buying," CGES said.
Crude oil stocks among members of the Organization for Economic Cooperation and Development rose sharply during October as refiners cut runs during turnarounds.
"Until the market has absorbed current surpluses and the U.S. passes the yearend, the outlook for oil prices remains weak," CGES said.
"If the weather returns to normal the next few months, prices will eventually recover, although the average for first quarter 1995 is likely to be lower than for fourth quarter 1995."
From an average $16.20/bbl in fourth quarter 1994, CGES expects the OPEC basket crude oil price to average $15.40/bbl, $16.80/bbl, and $18.20/bbl in the first three quarters, respectively, of 1995.
While OPEC's oil production is pegged at 24.52 million b/d, CGES expects non-OPEC producers to increase total production by about 1 million b/d.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
Issue date: 12/26/94
