Crude Oil Below $45 As OPEC Cuts US Production Forecast

OPEC said it expected demand for its crude next year to average 30.31 million barrels per day (bpd), up 190,000 bpd from last month, despite slower demand growth overall due to a weaker outlook for Latin America and China.

The cartel additionally elevated its forecast for global demand progress this yr by round 84,000 barrels a day to 1.46 million, and by 50,000 barrels to 1.29 million for subsequent yr.

Deutsche forecasts 2016 oil prices of WTI $US52 a barrel, rising to $US58 a barrel in 2017, but says that in the short term, the probability of a rebuilding of U.S. crude oil inventories over the September refinery maintenance period will likely prove to be a headwind for an extended recovery in oil prices.

However, OPEC did less than the worldwide Energy Agency. US output of shale oil will fall by almost 400,000 barrels per day in 2016.

The US benchmark for oil fell 14 cents to $44.49 a barrel on Monday.

Last week, global investment banker Goldman Sachs said that the global oversupply of oil was even bigger than they had thought, with its analysts anticipating a $20 price tag as soon as next year. The IEA asserted that given the current trend of non-OPEC production slumping downward, demand growth will have to be matched by OPEC supplies.

But through the collapse in prices, OPEC has continued to pump oil in a fight to maintain the market share it enjoyed for years.

The lower price environment is forcing the market to “behave as it should”, the IEA said, shutting in production and luring more buyers.

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

Output from South Sudan rose marginally to 0.17 million barrels a day in June from the previous month, and although a peace agreement was signed in August, whether it will hold remains uncertain.

The reason for the decline is the fall in price caused by a huge surplus of oil.

The Opec oil cartel has claimed that it is winning the Saudi Arabia-led war against the North American shale oil industry and predicted a further decline in USA oil output next year. By comparison, USA tight oil production was forecast to grow by 450,000 b/d between 2014 and 2015.

“While the group of emerging and developing economies has been the main growth engine in recent years, it has become clear that growth in this group is slowing down”, said OPEC.

Industrial production out of Japan was down a worse-than-expected -0.8% in July on the prior month, while the Eurozone data continues to paint a brightening picture: industrial production saw a better-than-expected +0.6% increase for July on the prior month, up 1.9% YoY.