OPEC says it sees evidence of lower drilling activities among rivals like the USA and Canada.
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Soaring output from Organisation of the Petroleum Exporting Countries (Opec) member Iraq has been a large contributor to that glut, with production there doubling over the past decade to about 4.3-million barrels a day, more than enough to meet all of India’s daily demand.
The IEA said in a monthly report that growth in demand for oil will ease next year to 1.2 million barrels per day, from 1.8 million barrels a day this year.
Crude oil prices edged up early on Thursday, supported by a fall in USA crude inventories after 10 straight weeks of builds, but a global oversupply and cheap oil are still dominating the broader market. OPEC last pumped more crude in April 2012, when its production was 31.7 million barrels a day, an OPEC official said.
“But OPEC showed last week it’s a paper tiger in that it won’t do anything to prevent supply growth”, said Michael Hewson, chief market strategist at CMC Markets.
“Despite the supply adjustment already underway in shale, oil markets look to start 2016 on a weak note, but the underlying adjustment process at work in the market should tighten balances within the next 12 months”, said JP Morgan in a report.
“As oil flirts with $40 per barrel and approaches a seven-year low, the [cartel’s] early December move appears to signal a renewed determination to maximise low-cost OPEC supply and drive out high-cost non-OPEC production – regardless of price”, said the IEA.
The outcome of the OPEC meeting seems to be having an equally strong effect as it had previous year, although the results of that meeting came as a surprise to no one. The greater-than-expected fall didn’t have any impact on crude oil prices. Why? All the while, current OECD inventories are 244 million barrels above the five-year average, at a total of 2,955 million barrels (aka, a glut).
Demand for OPEC crude in 2015 is estimated to stand at 29.4 mb/d, an increase of 0.4 mb/d over past year and representing a downward revision of 0.2 mb/d compared to the previous report.
“As such, US$20 per barrel is not our baseline scenario and it is quite unlikely that the market will set the oil price to be at US$20 per barrel”, he told Bernama.
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OPEC revised up its growth estimates for non-OPEC producers by 280,000 barrels a day to 1 million barrels a day, driven mainly by actual production data from the US, UK, Brazil, Russia and China.
