OPEC cuts US oil production forecast

The cartel has upped its expectation for oil demand growth this year by 84,000 barrels per day to 1.46 mn bpd, but revised its forecast lower for next year by 50,000 bpd to 1.29 mn bpd.

While the oil market may not see a balance between supply and demand until well into 2016, oil supplies might already be substantially declining.

Oil prices were also impacted by some crucial economic data from China, with industrial production in the world’s second largest economy rising at a slower-than-expected pace in August. U.S. product is forecast to grow from an estimated total of 13.86 million barrels a day (including natural gas liquids, or NGLs, and other liquids) this year to an average of 14.19 million barrels a day in 2016.

For instance, political unrest caused by terrorist groups like ISIS in Iraq or Boko Haram in Nigeria could cutback on oil exports affecting global prices and that’s not all, trade in futures (a derivative guaranteeing the holder a set price during the excise period) can lead to oil hoarding by producers.

This chart gives a better idea of where they expect growth to come from next year, along with where the growth was in 2013 and 2014.

While answering whether the increased production from the U.S. would be bearish for markets, Adkins emphatically responded “NO!” The 2015 demand for OPEC crude is still lower than its production of 31.26 million bpd for August.

Eulogio Del Pino said in an interview at Tuesday’s meeting between Venezuela and Saudi Arabia officials in Caracas.

“For 2016, projections for oil demand development in China are slightly lower than anticipated in last month’s report amid expectations of slower economic activity than previously assumed”, OPEC said. But OPEC has refused to cut output, seeking to recover market share by slowing higher-cost production in the United States and elsewhere that had been encouraged by OPEC’s former policy of keeping prices near $100.

“Indonesia has contributed much to OPEC’s history”, the statement from the group’s Vienna headquarters said.

Although some risks remain moving forward, this data combined with strong gasoline demand and a drop in the U.S. and Canadian rig count, is very bullish.

While the use of foreign reserves has helped to keep Saudi going, it has not proved to be a cure-all. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. The EconoTimes content received through this service is the intellectual property of EconoTimes or its third party suppliers.

Going forward, investors should be acutely aware of the firms indirectly affected by oil. Further, there have been times where its oil output has trickled out of the country due to export facilities being closed off.