OPEC said on Thursday that it expects oil production by countries outside the cartel to fall in 2016 by more than it previously forecast, in a sign that its audacious strategy may be working at last.
Advertisement
Sell-offs were triggered ahead by the OPEC monthly report, as per which the cartel’s oil production rose in November by 230000 to 31.7 mn barrels per day.
OilPrice reports that ran’s return to the global oil market will only contribute to the oversupply of oil, especially since OPEC, of which Iran is a member, agreed at its third consecutive ministerial meeting on December 4 not to adjust its daily output to bolster prices.
Its report said world oil demand in 2016 is uncertain, “depending on the pace of economic growth, development of oil prices, and weather conditions, as well as the impact of substitution and energy policy changes”.
Brent futures are down more than 11 percent this month and, having dipped below $40 per barrel, there are renewed expectations it might test 2008’s low around $36.
Brent crude fell sharply since last Friday before settling at US$40.62 per barrel on Wednesday, after the oil grouping failed to agree on a production ceiling, thus prolonging the oversupply condition in the market.
Iraq has pushed output to record levels this year as worldwide companies develop fields in the south, while the semi-autonomous Kurdish region increases independent sales in the north, according to the global Energy Agency.
The group’s report on Thursday signaled that plan had shown some success in driving out American production that requires higher prices, but the market overall hasn’t recovered, with Brent crude slumping below $US40 a barrel in recent days.
The group maintained its projections for crude it will pump in 2016 at approximately 30.8 million barrels daily. “No, you can’t”, he said, although adding that prices would not likely fall that far.
OPEC left its 2016 oil demand growth forecast unchanged, predicting global demand would rise by 1.25 million bpd, marking a slowdown from 1.53 million bpd in 2015. Analysts had projected an increase of 252,000 barrels. Half of that, it said, would come from the United States.
Advertisement
Gorry said he expected a slow rebalancing of the market towards the end of next year, with production remaining stubbornly high despite low benchmark prices.
