OPEC affirms its forecast for 2016 on decline of Azerbaijan’s oil production

OPEC said on Thursday that it expects oil production by countries outside the cartel to fall in 2016 by more than it previously forecast, in a sign that its audacious strategy may be working at last.

On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.5% at $36.56 a barrel.

Brent crude futures dropped 0.5 percent at $39.52 a barrel, the 7-year low was $39.38 a barrel.

In its latest monthly oil market report, Opec said low prices will drive strong global demand in 2016, which is estimated to be around 94.13 million bpd, up 1.25 million bpd from this year’s 92.88 million bpd, that was an increase of 1.53 million bpd over last year. 380,000 barrels/day – an average of 54.14 million/day – with an expected contraction in the US accounting for roughly half the drop. Demand growth will likely slow to 1.23 million bpd in 2016 from a five-year high of 1.79 million bpd in 2015 as support from sharply falling oil prices begins to fade. In November, OPEC, which pumps about a third of the world’s oil, has seen its production increase by 230,100 barrels per day (b/d) in comparison with the previous month, at about 31.7 million bpd.

Russian Federation is preparing for the possibility that low crude prices are here to stay as competition between oil and other fuels such as natural gas intensifies.

“OPEC showed last week it’s a paper tiger in that it won’t do anything to prevent supply growth”, said Michael Hewson, chief market strategist at CMC Markets.

“Non-OPEC growth year-on-year is grinding to a halt, so some of the effects from low oil prices are starting to appear”, said Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd.in London.

But contrary to popular belief, the Organization of the Petroleum Exporting Countries isn’t the only reason for oil’s most recent downturn.

Producers are counting on global consumers to ratchet up demand for crude as they take advantage of low retail prices for gasoline and diesel.

Opec’s demand this year is around 29.4 million bpd, lower than its current output. ― File picSEOUL, Dec 11 ― Oil headed for the biggest weekly decline since March amid speculation OPEC’s decision to effectively scrap production targets will keep the market oversupplied.