LONDON/ABU DHABI: OPEC raised its forecast on Monday for demand for its oil in 2018 and said its deal with other producers to cut output was reducing excess oil in storage, potentially pushing the global market into a deficit next year.
The Organization of the Petroleum Exporting Countries also said in a monthly report it had cut its estimate of 2018 supply from producers outside the group and said oil use would grow faster than previously thought due to a stronger-than-expected world economy.
OPEC said the world would need 33.42 million barrels per day (bpd) of OPEC crude next year, up 360,000 bpd from its previous forecast and marking the fourth consecutive monthly increase in the projection from its first estimate made in July.
“The global economic growth dynamic has continued its broad-based and relatively strong momentum,” OPEC said.
“The ongoing momentum could still provide some slight upside potential.”
Oil prices, which are trading close to the highest since 2015, rose further toward $64 a barrel after the report was issued. Crude is still about half its level of mid-2014, when a build-up of excess supply led to a price collapse.
The 14-country producer group said its oil output in October, as assessed by secondary sources, was below the 2018 demand forecast at 32.59 million bpd, a drop of about 150,000 bpd from September.
The report’s OPEC production figures mean compliance with the supply cut by the 11 members with output targets has risen above 100 percent from 98 percent in September, according to a Reuters calculation.
“The high conformity levels of participating OPEC and non-OPEC producing countries ... have clearly played a key role in supporting stability in the oil market and placing it on a more sustainable path,” the report said.
Should OPEC keep pumping at October’s level, the market could move into a deficit next year, the report indicates.
Oil producers are expected to unanimously extend a production cut accord later this month but its duration is being discussed, the UAE energy minister said on Monday.
“I think this group of committed and responsible producers came together ... and I think they will continue to do what it takes to take us to the next level,” United Arab Emirates Energy Minister Suhail Al-Mazrouei told an international oil conference in Abu Dhabi. He said 158 million barrels of surplus crude oil remain on the market and “we need to reduce that — which means there is a potential for extension.”
Mazrouei said there was near-unanimity among the 24 OPEC and non-OPEC producers which agreed a year ago to cut output by 1.8 million bpd.
He added that he had “not heard anyone” speak of allowing the extension to expire, although the duration of the new extension would be “subject to discussion.”
“I am hopeful that we will reach an agreement that will lead to more stabilization in the market and more investments coming to the market,” he said.
As a result of the cuts, oil prices have rebounded to more than $64 a barrel from $40 a year ago, and huge stocks of crude built up over the past three years have reduced.
Mazrouei, whose government is OPEC’s fourth largest oil producer, said he was not happy with the sharp fluctuations in prices, saying they need to be more stable.
OPEC ministers are holding a crucial meeting in Vienna at the end of November to discuss extending the cuts deal as well as imposing the quota system on countries that have so far been exempted: Libya, Iran and Nigeria.
Saudi Arabia and Russia have voiced support for a rollover to the deal, the duration of which remains up for debate.
— REUTERS/AFP
OPEC points to 2018 oil supply deficit as market tightens
OPEC points to 2018 oil supply deficit as market tightens
