OPEC wants to keep cutting production and enforce production cuts is has already made so that none of its members try to dodge the cartel’s limits to pick up a little extra cash.
The effort to get oil prices back up and get more money flowing to OPEC members who are becoming increasingly desperate for cash got a blow as estimates of crude consumption for this year were cut.
According to MarketWatch, “The International Energy Agency on Friday revised down its forecast for 2009 global oil demand by around 300,000 barrels a day to 84.4 million barrels a day, or a roughly 1.5% fall year-on-year, on a reassessment of demand prospects.”
If the recession hits levels estimated by the IMF and World Bank a 1.5% drop in demand may only be the beginning of a long period when the economies of the US, Europe, Japan, and even China do not need anywhere near the amount of oil they have required over the last decade. Cautious consumers and businesses may simply lose their ability to pay for as much oil, diesel, and gasoline as they have in the past.
If the American economy has double digit GDP drops two or more quarters in a row and Chinese factory production and exports keep diving, OPEC may only be seeing the early stages of its troubles.
Douglas A. McIntyre
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