Opec expects higher supply from members outside the bloc in 2018, as US shale producers take advantage of rising prices stemming from the extension in November of a deal to curb crude output, it said on Thursday.
For a second month in a row, Opec revised upwards its forecast for 2018 oil production from members outside the 14-member organisation. It now forecasts an average non-Opec increase of 1.15 million barrels per day (bpd) for the year, up 16 per cent from its projection of 990,000 bpd from last month.
Around 1.15 million bpd of non-Opec oil will come from the US this year, offsetting declines from producers that include Russia and other countries participating in a deal with Opec members to cut production by 1.8 million bpd of oil until the end of the year.
The curbs are aimed at raising prices and bringing the global crude inventories back to a five-year average. OECD commercial oil stocks in November were around 133 million barrels above the latest five-year average.
“Higher oil prices are bringing more supply to the market, particularly in North America and specifically tight oil, including unconventional NGLs,” Opec said in its monthly report.
“Shale producers in the US have managed to lower their breakeven costs by 30-50 per cent in 2015-17, by improving technology and efficiency and as oil field service providers offered deep discounts on rigs and crews to retain their share of a shrinking market.”
Brent oil prices, which fell to below $30 a barrel in the beginning of 2016, have since recovered to hover around $70 a barrel, thanks to the output cut deal and higher demand spurred by robust global economic growth. Demand for Opec crude in 2018 is expected to reach 33.09 million bpd, compared with 32.89 million bpd in 2017, Opec forecasts.
The bloc produced on averaged 32.42 million bpd in December, according to secondary sources, the report said.