Opec Ups Forecast For Non-Opec Oil Output
Oil markets will remain heavily oversupplied well into 2017, Opec warned on Monday, as the cartel revised up its forecasts for output from countries outside the exporters’ group.
Opec said oil supply outside the group is now expected to expand next year, potentially leaving the market with more than 750,000 barrels a day overhang if the cartel maintains its current elevated production levels, reports Anjli Raval in London.
Writing in its monthly oil market report, Opec said 2016 output outside the group would now only contract by 610,000 barrels a day — following an upward revision of 180,000 b/d from August — to average 56.32m b/d. Non-Opec supply for 2017 was revised up by 350,000 b/d to average 56.52m b/d, an increase on this year.
“This has been mainly due to a lower-than-expected decline in US tight oil and a better-than expected performance in Norway, as well as the early start-up of Kashagan field in Kazakhstan,” Opec said.
US drillers added oil rigs for a tenth week in the last 11, according to data from services company Baker Hughes published on Friday. It was the longest streak without rig cuts since 2011. This followed an upward revision for US production from the US energy department.
The growth of 200,000 b/d next year is mainly due to new production from Kashagan, Opec said.
Current Opec supply stands at 33.2m b/d, according to secondary sources such as analysts and consultants. This is down slightly from August, but more than 1m b/d above a year ago.
While demand for the group’s crude is higher than last year, Opec’s production levels remain elevated compared to what is needed by the market.
The “call” on Opec for 2016 is at 31.67m b/d for 2016 and 32.48m b/d for 2017.
“We find that there could be an imminent flush of new [production] streams, delaying any rebalancing of the market and bringing new pressure on prices,” said JBC Energy analysts in a recent report, naming projects in the North Sea, Russia, Brazil and the US Gulf of Mexico alongside Kazakhstan.
Despite robust oil demand growth, the oil market will remain oversupplied this year and next, Opec said.
Some Opec producers such as Venezuela and Algeria have been pushing for a global deal to curb further increases in crude production and prevent any further drops in the oil price. These moves come after similar talks in April for an output freeze failed when Saudi Arabia insisted that Iran join any agreement.
Since, Saudi Arabia and other big producers have only ramped up production. Secondary estimates and the kingdom’s own communication to Opec suggests Saudi Arabia’s output held around 10.6m b/d — near record levels.
Saudi energy minister Khalid Al Falih said last week there is no hurry to limit output, but there is a possibility to do so in the future.
Iran, meanwhile, has said it supports measures to stabilise the market but has not comitted to any output restraint until reaching 4m b/d — a level at which it was pumping prior to the impositions of western sanctions against its oil industry.
Opec data showed Iranian output has held near 3.6m b/d for several months.
Analysts say even if these Opec exporters, together with non-Opec peers such as Russia, agree on freezing output around current levels, it would do little to raise prices as many are pumping flat out.