At the beginning of the week, OPEC also said it expects the global supply of oil to be more balanced in the last six months of the year due to outages in Nigeria and Canada.
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The report revises its May forecast of 1.2 million barrels per day (bpd) by stating that demand growth in 2017 will likely increase by 1.3 million bpd, the same rate as this year, to 97.4 million bpd.
Crude output from the Organization of the Petroleum Exporting Countries fell by 100,000 bpd in May to 32.61 million bpd, after a spate of attacks on oil infrastructure in Nigeria offset higher output from the Middle East. Production was still 500,000 bpd higher than in May previous year, however.
OPEC has published a report which predicts that the oil demand is expected to grow this year and extraction in the oil-exporting countries will fall, which will create positive trends in the global oil market.
The UK Brent crude for August delivery fell back below $50 per barrel, trading early on Tuesday at $49.79 on the London ICE Futures Exchange, and US West Texas intermediate for July delivery traded at $48.35 a barrel on the New York Mercantile Exchange. They say however, that a large worldwide stockpile of oil will result in prices stabilising through the rest of the year.
Oil demand in the first quarter was revised up by 400,000 barrels to 1.6 million barrels/day.
Even so, it said, “There is an enormous inventory overhang to clear”, the IEA said.
Outages in OPEC and non-OPEC countries cut global oil supply by almost 0.8 mb/d in May. However, production from US shale is expected to decline by 0.5 million barrels/day this year and 190,000 barrels/day in 2017. The production of distillate fuel (fuel and diesel oils) also increased, averaging 5 million barrels per day.
USA crude fell to a three-week low of $47.55 as the contract dropped for a fifth day. First quarter demand was estimated at 1.6 million barrels per day, with a full-year average expected at 1.3 million bpd.
The drop comes despite Iran’s fast return to the OPEC oil market with an anticipated gain of 700,000 bpd, according to the same source.
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OPEC’s decision in November 2014 to defend its market share in the face of rival producers rather than the price of oil – which it could have done by cutting production – meant that non-OPEC producers with higher production costs (such as those in the US shale oil industry) were pressured to cut output and production.
