OPEC’s monthly report has stated that likely demand for its oil next year will be much higher than expected
According to its estimates, consumers would require 30.82mn bpd from OPEC next year, which was up 510,000 bpd from the earlier prediction.
Based on its predictions, it would appear that the OPEC strategy is working, stated a Reuters report. “This should reduce the excess supply in the market and lead to higher demand for OPEC crude, resulting in more balanced oil market fundamentals,” said the report.
Last year, OPEC decided against increasing prices and instead, raised output and seeking to recover market share taken by higher-cost rival production.
Currently, oil is trading below US$53 a barrel – half its price back in June 2014.
Outside of OPEC, the supply is expected to decline 130,000 bpd in 2016 as output falls in the USA, former Soviet Union, Africa, Middle East and a considerable part of Europe. Specifically, output from the USA, the biggest non-OPEC supplier, has been affected due to limited drilling activity and tighter credit conditions that have limited access to funds.
The higher call on OPEC comes despite weaker global demand growth overall. OPEC reduced its estimate of 2016 world oil demand growth by 40,000 bpd to 1.25mn bpd, citing slower growth in China, said Reuters.
On the other hand, OPEC’s supply continues to increase as secondary sources in the OPEC report said that the members pumped 31.57mn in September, which is 110,000 bpd from August. If pumping rates are maintained, it would appear that there could be a 750,000 bpd surplus in the market next year.