Opec still does not expect the oil market to move back into balance until the second half of next year, despite agreeing a global supply pact with Russia and other countries to cut output.
In its monthly outlook, the 13-member cartel pegged demand for its crude at 32.6m b/d next year – just 100,000 b/d above the group’s new output target of 32.5m b/d – and said the further supply cuts agreed with non-Opec members would contribute to mopping up excess supplies, but only slowly, writes David Sheppard.
“Combined with the joint cooperation with a number of non-Opec countries in adjusting production by around 600,000 b/d [this] will accelerate the reduction of global inventories and bring forward the rebalancing of the oil market to the second half of 2017,” Opec said.
The cartel’s view of the market is more conservative than some other forecasters. On Tuesday the International Energy Agency said it now expects the oil market to start moving into balance in the first half of next year.
Opec said that Saudi Arabia, the cartel’s largest producer, told the organisation it had raised output to 10.72m b/d in November – an all-time record – ahead of the group’s meeting in Vienna at the end of that month.
The cartel said the group’s total output last month based on assessments by so-called secondary sources, was 33.87m b/d – suggesting it will need to reduce output by almost 1.4m b/d from January to hit it the new supply target agreed at the meeting.
Members Nigeria and Libya, who saw some of the biggest increases in output in November as violence-hit production returned, are however exempt from supply cuts.
Brent crude oil, the international benchmark, has rallied by almost 20 per cent since Opec agreed supply curbs, extending gains this week after Russia and other producers agreed to contribute cuts.
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