Why is oil price high? Even OPEC wonders

VIENNA – The Organization of Petroleum Exporting Countries (OPEC) left its 2012 oil demand forecast unchanged on Thursday, April 12, but cautioned that it now expects slower global economic growth, notably because of the eurozone debt crisis.

Current high prices were unjustified, driven by speculative activity on the markets rather than economic fundamentals, it said.

OPEC put world demand this year at 88.64 million barrels per day (mbd), up 0.86 mbd from 2011 and compared with 88.63 mbd in its previous monthly report.

“Various economic developments worldwide are almost offsetting each other, leaving the total oil consumption picture nearly unchanged from last month,” OPEC said.

It reiterated its charge that current high prices were due to speculation on the markets, combined with geopolitical concerns — essentially tensions over Iran’s nuclear program — and did not reflect actual demand.

“Given real market circumstances, it is clear that the existing high prices cannot be justified by the current market fundamentals.

“Instead, it is more the impact of geopolitical factors and a perceived shortage of oil — rather than evidence of any actual or impending shortfall — that is keeping prices high.

“These fears, amplified by speculative activity, remain a key driver pushing prices higher,” the report said.

The 12-member cartel, which accounts for about a third of global oil supply, said it cut its 2012 global growth forecast to 3.3% from 3.4%.

“With continued concern in the eurozone and the softening in the emerging markets, the outlook for the global economy remains fragile,” it warned, with the 17-nation eurozone economy now expected to shrink 0.3%, rather than 0.2%.

Earlier on Thursday, the International Energy Agency, which advises developed countries, also left its 2012 oil demand growth forecast unchanged at 0.8 mbd to 89.9 mbd.

At the same time, however, it said improved supply appeared to be easing tensions in the oil market which have driven prices consistently higher since late 2009. – Agence France-Presse