The Organisation of Petroleum Exporting
Countries (OPEC) has predicted a larger surplus in the oil market in
2017 from non-OPEC members as new fields come on stream, according to
the cartel’s monthly Oil Market Report (OMR) published monday.
Apart from new oil fields coming on
stream, the anticipated glut in the oil market will be further buoyed by
the United States shale producers, who have refused to be forced out of
the market by the low oil price.
The booming output from shale oil fields
had pushed the global market into oversupply in 2014, with prices
plummeting from a peak of $115 per barrel in June 2014 to an all-time
low of $27 per barrel in January this year.
The prices later recovered to a 2016
peak of $52 per barrel in June before it dropped, hovering around $47
yesterday after it had approached $50 per barrel at the weekend,
following a drop in the United States inventory data to nearly a
two-decade low.
Prices above the $40 per barrel range
would encourage the high cost shale producers to boost output, while a
price range below $40 would force the shale producers out of the market
and prompt OPEC and non-OPEC to mull production cuts as oil companies
cut spending.
The shale producers have proved more resilient to cheap oil than expected, thus fuelling a concern of larger surplus next year.
Reuters reported that the prospect of a
larger surplus than expected has added to the challenge of OPEC and
non-members such as Russia, who are making a renewed attempt to curb
output.
According to OPEC’s OMR, the demand for crude from OPEC will average 32.48 million barrels per day (bpd) in 2017, down from the previous forecast of 33.01 million bpd.
According to OPEC’s OMR, the demand for crude from OPEC will average 32.48 million barrels per day (bpd) in 2017, down from the previous forecast of 33.01 million bpd.
OPEC revised up its 2016 and 2017
non-OPEC supply forecasts, citing factors including the start-up of
Kazakhstan’s Kashagan oilfield and a lower-than-expected decline in US
shale output, and said the immediate outlook was for more production.
“It is expected that there will be
higher non-OPEC production in the second half of 2016 compared to the
first half,” OPEC said in the report.
OPEC expects non-OPEC supply to rise by 200,000 bpd in 2017, versus a previously forecast 150,000 bpd decline.
The revision is mostly due to Kashagan, OPEC said, as the long-delayed giant field finally starts up.
On top of that, the forecast for this year was revised up by 180,000 bpd.
OPEC itself kept output near a multi-year high in August, pumping 33.24 million bpd, down 23,000 bpd from July’s figure, the report said.
OPEC itself kept output near a multi-year high in August, pumping 33.24 million bpd, down 23,000 bpd from July’s figure, the report said.
The July figure is the highest since at least 2008, according to a recent Reuters review of past OPEC reports.
Reuters reported that oil prices pulled
back yesterday amid receding hopes for a production freeze deal and a
broad perception that last week’s significant drop in US crude
inventories was unlikely to be sustained.
The November contract for global crude
benchmark Brent was down 1.4 per cent at $47.34 a barrel, while its US
counterpart West Texas Intermediate was down 1.66 per cent at $45.13 for
October deliveries.
The prices at the weekend had surged
about four per cent after the United States inventory data showed a drop
in stocks to nearly a two-decade low as crude imports into the US Gulf
Coast slid last week due to Tropical Storm Hermine.
But most observers have agreed the
massive 14.5 million barrel reduction in US oil stocks was driven mostly
by inclement weather and that there is a high likelihood prices are
correcting themselves already in anticipation of a similarly sized build
up when data are released this week.
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