MercoPress. South Atlantic News Agency

Opec's April market report

Initial data for 2006 shows the world economy continues to experience strong growth, despite disappointing GDP growth in the final quarter of last year, according to the OPEC Monthly Oil Market Report.

"Consensus forecasts have been revised up and the world economy is expected to grow at a rate of at least 4.5% in 2006 ? very substantial growth for the fourth year of the recovery," the report noted.

The strength of the upswing and favourable global financial conditions have allowed consumers and businesses to absorb higher fuel costs, it said, adding that the impact on global GDP of the rise in oil prices since 2002 has been around 1%.

However, the report pointed to some downside risks. These include the tightening of monetary policies in the USA, Europe and Japan, as central banks guard against the inflationary consequences of high commodity prices, as well as shrinking spare capacity and tighter labour markets.

The engines of the world economy, the USA and China, are expected to record solid growth but momentum may weaken towards the end of the year, the report said. Renewed growth in Japan and Europe may take up the slack although export growth is important to both regions.

In its review of the market, the report said that global oil demand appears to have grown by almost 1 mb/d or 1.2 % to average 83.1 mb/d during 2005. In 2006, world oil demand is forecast to grow by 1.4 mb/d or 1.7 % to average 84.5 mb/d, marginally lower with respect to the growth estimate in the last MOMR.

The slight downward revision to this year's growth can be traced back to the disappointing consumption in the US over the first three months of 2006 partially offset by an above trend growth in Western Europe, especially in January. The report highlighted the fact that economic uncertainties could have an adverse impact on oil demand growth, particularly in the developing countries.

Turning to supply, Non-OPEC output in 2005 is expected to average 50.1 mb/d, representing marginal growth of 0.2 mb/d over 2004. In 2006, non-OPEC oil supply is expected to average 51.5 mb/d, an increase of 1.4 mb/d over 2005 or broadly unchanged from the last assessment.

As a result of these trends, the estimated demand for OPEC crude in 2005 has been revised to 28.8 m/d, representing an increase of 0.6 mb/d from last year and a revision of 0.1 mb/d. In 2006, the demand for OPEC crude is expected to average 28.5 mb/d, representing an upward revision of 0.1 mb/d versus the previous month, the report said.

Global oil prices were volatile for most of March before increasing steadily at the end of the month. As a result, the OPEC Reference Basket averaged 57.86 US dollars p/b for the month, a gain of 1.24 or over 2%. Prices continued to move higher in April, with the Basket reaching a new record high of 65.02/b on 17 April. Crude prices have moved higher, despite rising crude inventory levels, the report said. In the week ended 7 April, US crude stocks reached 346 mb, the highest level since 1998.