Just as the supply from non-members was forecast to dwindle, OPEC raised its forecast for world oil demand growth in 2015, predicting it will rise by 1.53 million barrels per day (mb/d) to average around 92.88 mb/d – up 30,000 barrels from the previous month’s forecast – and for 2016.
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The prices of crude oil stayed at levels which are not seen since early 2009, as the output in the Middle East continued to increase, despite of huge oversupply.
The group is battling for market share with other oil producers, including the United States, and had last Friday decided against cutting output despite plunging prices, weak global demand and the supply glut.
Markets have reacted to Friday’s IEA report by knocking about 1.5% off the price of benchmark West Texas Intermediate (WTI), now trading at around $36.22 after closing at $36.76 on Thursday.
According to the OPEC report, fall of oil supply to the global market is expected on all the countries of the former Soviet Union (FSU) in 2016.
Brent futures slipped below $US38 a barrel for the first time since December 2008 while WTI fell below $US35 a barrel and is rapidly approaching its GFC low of $US32.40.
Oil futures extended their tumble with little pause yesterday, with crude prices hitting their worst levels since the 2008/9 credit crunch, after the International Energy Agency (IEA) warned that global oversupply could worsen next year.
OPEC Basket Oil Price stood at $34.80 per barrel on Dec.9, plunging to its lowest level since December 29, 2008.
Furthermore, early indicators for the current quarter were that growth in demand will ease to 1.3 m/bd from a year earlier after reaching a peak last quarter at 2.2 mb/d, the IEA added.
190 million barrels is the equivalent of one month’s cover of Chinese net crude imports. “There is unlikely to be any kind of “happy ending” for oil prices this year”.
“The latest OPEC meeting, which concluded by essentially saying that it’s every producer for himself, actually presents a silver lining for the oil market”, said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA.
The accumulation of the surplus will actually slow next year to about half the pace observed in 2015 as non-OPEC supply wilts and demand remains strong enough to absorb some of the excess. Thus, oil prices could trade lower in 2016.
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In response to the oil price decline, Fitch Ratings said the 2016 outlook for Gulf Cooperation Council (GCC) economies remained negative. Analysts expect the first two quarters of 2016 to be tough but the industry looks to later in the year where demand is hoped to increase, making the next six months a time of nervous survival in the industry for key players.
