Opec expects stronger demand for its crude oil next year due to stronger consumption growth and lower estimates for supply from outside the cartel, as prices near $50 a barrel boost driving and crimp output.
The cartel’s monthly oil market report said its in-house analysts now see demand for Opec’s oil reaching 33.1m barrels a day in 2018, up by roughly 200,000 b/d from last month’s forecast, with the increase largely split between stronger demand and lower estimates of non-Opec supply.
The increase comes as the 14-member cartel prepares to meet in Vienna next month to decide whether to rollover the output curbs that have been in place since January, in conjunction with other large producers like Russia.
The group is widely expected to extend the cuts beyond March next year to continue drawing down excess stocks built-up since 2014, when prices first crashed from above $100 a barrel due to surging US shale output.
Brent crude, the international benchmark, has risen by more than 25 per cent since June to trade near $57 a barrel, boosted by stronger demand and marginally lower forecasts for US shale growth.
Opec kingpin Saudi Arabia is, however, battling rising output from other members within the cartel.
The group’s crude production reached 32.7m b/d last month, according to secondary sources including consultants and analysts the report uses to assess member output, up by 88,500 b/d compared to August.
The output increase was led by Nigeria and Libya – the two members exempt from the output deal due to the years of conflict that have afflcited their oil industries – but also Iraq, which increased output to 4.5m b/d.
Saudi Arabia’s own output was flat at just under 10m b/d, the secondary sources said, largely in line with the country’s own directly communicated production numbers.
The cartel is being helped by strong global economic growth, which has reached 3.6 per cent and boosted oil demand by 1.5m b/d this year, the report said. Growth is now expected to increase demand by a further 1.4m b/d next year – a slight increase on last month’s forecast.
Opec revised lower its forecast for non-Opec supply growth by around 100,000 b/d for this year to 700,000 b/d, and cut its estimate for next year by 60,000 b/d to 900,000 b/d.
Opec’s report said “oil prices rose steeply in September amid major support from improving market fundamentals,” but cautioned they may not rise much further without triggering stronger growth from shale.
“Oil prices are expected to remain at $50-55 a barrel in the next year. A rise above that level would encourage US oil producers to expand their drilling activities.”
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