OPEC predicts ‘improved’ oil market in 2016

Consumption in China and the developing world will recover while supplies of North American shale oil will grow more slowly, the cartel said in its monthly report.

In OPEC’s monthly oil market report published on Monday, Riyadh self-reported crude oil production of 10.6 million barrels a day in June, an increase of more than 200,000 b/d on the previous month and its highest level since records began.

In 2016, world oil demand growth is forecast to pick up by 1.34m bpd, reaching almost 94m bpd.

OPEC said supply of oil from non-OPEC producers was expected to grow by only 300,000 bpd in 2016, down sharply from growth of 860,000 bpd this year.

In anticipation of Iran’s rising economic and geopolitical clout in the region, the Saudis say they have kept up the high level of production despite a global slump in prices to protect their market share.

But the Organization of the Petroleum Exporting Countries warned that oil output would also continue to increase this year, which means the current supply glut and low prices are likely to remain unchanged until next year.

Saudi Arabia is the only major oil producer with significant spare capacity and it appears willing to utilise it, especially as it eyes the possible normalisation of relationships between Iran and western powers. “No cut. This year for sure not”, said a third Gulf delegate, adding that it was too early to make a sound judgement on how soon can Iran raise its oil flows. Lower prices have squeezed high-cost oil producers and brought a sharp fall in the number of oil exploration rigs in operation, particularly across North America.

How Long Will Oversupply Concerns Rule the Crude Oil Market? The Paris-based watchdog group said Friday that is expects global oil demand growth to slow to 1.2 million barrels per day in 2016, down from an average of 1.4 million barrels in 2015.

OPEC in 2014 produced as many as 30,683,000 barrels of oil, that is 30 million barrels more than its approved production ceiling. Brent, the global standard, fell 90 cents to $57.83 a barrel in mid-day trading on the ICE Futures Europe.

The new forecasts came after OPEC’s 12 members increased production in June, hitting a three-year high.