Opec sees balanced oil market next year

Filed on July 14, 2015 | Last updated on July 14, 2015 at 08.36 am
Opec sees balanced oil market next year
Workers perform maintenance on oil pipelines at the Sirte Oil Company in Brega October 20, 2013. For Libyan militia leader Ibrahim al-Jathran, shutting down half the country's oil production with an armed militia is not a crime, it is the start of a just battle for a fair share of country's petroleum wealth. From his base near the Mediterranean oil terminal of Brega, the 33-year-old war hero from the uprising against Muammar Gaddafi has taken control of the main oil ports to demand more autonomy and oil for his eastern region from faraway Tripoli.

(Reuters file)

Saudi Arabia raises oil production to a record

The global oil market should be more balanced next year as China and the developing world increase oil consumption while supply of shale oil from North America and other regions grows more slowly, Organisation of the Petroleum Exporting Countries, or Opec, said on Monday.

In its monthly report, Opec said it expected world oil demand to increase by 1.34 million barrels per day (bpd) in 2016, up from growth of 1.28 million bpd this year.

This would outpace the growth of oil supply from non-Opec sources and ultra-light oils such as condensate, increasing demand for Opec crude oil, it said.

"This would imply an improvement towards a more balanced market," Opec's in-house economists said in the report.

Opec said it expected demand for its own crude oil to rise by 860,000 bpd in 2016 to 30.07 million bpd. But it cut its estimate of demand for its crude this year by 100,000 bpd to 29.21 million bpd.

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. US oil output, which has seen rapid increases over the last five years thanks to the development of huge shale resources by "fracking", is expected to log much more modest supply growth in 2016.

"Total US liquids production is expected to grow by 330,000 bpd, just one third of the growth of 930,000 bpd expected this year," it said.

World oil supply has grown much faster than demand this year, led by Opec as its core members in the Middle East attempt to build market share, leading to higher inventories.

Saudi Arabia, in particular, has pushed up its oil production to record highs, industry sources say.

Opec estimated, based on figures from secondary sources, that its own group crude oil output rose 283,000 bpd to 31.38 million bpd in June, led by Iraq, Saudi Arabia and Nigeria.

It said Saudi Arabia had told it that it pumped 10.56 million bpd last month, up 231,000 bpd from May. Saudi Arabia told Opec it raised oil production to a record as the organisation forecast stronger demand for its members' crude in 2016.

The world's biggest oil exporter pumped 10.564 million barrels a day in June, exceeding a previous record set in 1980, according to data the kingdom submitted to the Organisation of Petroleum Exporting Countries, or Opec. The group expects demand for its crude to rise in 2016 compared with this year as supply elsewhere falters and consumption growth quickens.

Opec said it expects global oil markets to rebalance as diminished output from rival producers such as US shale drillers whittles away a glut. The strategy is taking time to have an impact, with crude prices remaining 46 per cent below year-ago levels and annual US production forecast to reach a 45-year high.

"An improvement towards a more balanced market" is likely in 2016 as consumption grows faster than supply, Opec's Vienna- based research department said on Monday in its monthly market report. "Momentum in the global economy, especially in the emerging markets, would contribute further to oil demand growth in the coming year."

Brent crude futures fell 1.8 per cent to $57.70 a barrel at 10:51am local time on the London-based ICE Futures Europe exchange, extending a 2.6 per cent loss last week.

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