Opec must close 1.43m bpd gap

Demand growth in China and the Middle East in the second half of 2011 will require Opec to add 1.43 million barrels of oil per day (bpd) to balance the market, according to a Reuters poll. Opec's monthly report published in early June said world demand for its oil would average 30.7 million bpd in the second half, much higher than the 28.97 million bpd the group produced in May. But its June meeting in Vienna broke up without any agreement on raising output quotas to deliver this additional 1.73 million bpd. "You still have decent demand growth in China despite the country's tighter monetary policies," said Gordon Kwan, head of regional energy research at Mirae Asset Securities in Asia. Article continues below "Demand is also growing in the Middle East, so if they don't produce more, they will be exporting less." Saudi Arabia is reportedly boosting its supplies to 10 million bpd in July, but several analysts expect to see an inventory draw from commercial stocks in the second half to help bridge the demand gap. "It will be a mixture of increased Opec production and a drawing down from stocks. That's the most likely combination," said Roy Jordan, an analyst at Facts Global Energy, which declined to give a numerical forecast. David Wech, head of research at JBC Energy in Vienna, was also sceptical about Opec members increasing their output to a level sufficient to bring the market into equilibrium. "We will likely face some noticeable stock draw in the second half," he said.