OPEC scales back 2016 oil forecast as emerging markets disappoint

The Saudi-led oil cartel said daily crude production outside of OPEC is likely to grow by 160,000 barrels next year, a figure 110,000 barrels lower than its estimate last month, largely because USA oil production is slipping faster than expected.

It appears that OPEC is winning the contest with USA tight oil producers to see which can continue to over-produce oil at low prices.

The group revised the world crude demand growth for 2015 upwards by 84,000 barrels per day (bpd), to 1.46 million bpd.

Opec is cautious in its optimism: “Despite moderate economic growth, recent data shows better-than-expected oil-demand in the main consuming countries”. The EIA reported that USA storage levels rose again last week, to the tune of 2.6 million barrels. Saudi Arabia and Iraq are among the biggest OPEC producers, though Iran plans to ramp up production once worldwide sanctions are lifted, thanks to its nuclear deal with the US. Dating back to July 10th, the average weekly falloff in production has averaged 52,111 barrels per day (364,777 barrels per week). Demand in 2016 is now forecast at 94.08 million barrels a day, an increase of 1.29 million barrels a day over 2015 levels.

The worldwide Energy Agency (IEA), in a report on Friday, confirmed OPEC’s reason for optimism, reporting that supply from non-OPEC countries, including the United States, will plunge in 2016 by nearly 500,000 barrels a day. Slowing growth there could further dent oil prices, which have fallen spectacularly since June 2014 when a barrel of Brent crude fetched $114.

The oil cartel said Monday it lowered expectations for non-OPEC oil supply this year due slowing production in America’s shale regions.

OPEC’s strategy “can now be judged as successful in the sense that it has postponed USA supply growth by a year or more“.

Not anymore. If OPEC’s projections are accurate, the rout in oil prices is finally catching up to USA oil output.

Despite brash statements by USA producers and misleading analysis by Raymond James, low oil prices are killing tight oil companies. “This could contribute to a reduction in the imbalance of the oil market fundamentals, however, it remains to be seen to what extent this can be achieved in the months to come”.

Goldman Sachs advised that “the oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016″, adding that “the potential for oil prices to…”

Indonesia’s status as a net importer had raised the question of whether it would return as a full member given that OPEC’s Statute says any country with a “substantial net export of crude petroleum” may become a full member.