Opec, in its regular monthly market report, forecast lower demand for its members’ crude oil this year and next as economies continue to show only lacklustre growth amid ample oil supply.
The report by the Opec Secretariat in Vienna reflects the general thrust of those by other organisations, such as the International Energy Agency, the Paris-based rich countries’ think tank on energy, in recognising that the world oil market is currently well supplied and will remain so until demand picks up significantly.
Oil prices have been declining since the middle of the summer, when European benchmark Brent crude oil futures were above US$115 a barrel. Late in European trading on Wednesday, Brent futures were down 43 cents at $98.73, already well below the pain threshold for the majority of Opec members in terms of their national budgets, although still above budget break-even levels for the key Arabian Gulf swing producers of Saudi Arabia, the UAE and Kuwait.
Opec’s latest report left its estimate for world economic growth unchanged for this year and next, at 3.1 per cent and 3.4 per cent, respectively. It revised upwards fractionally its estimate of how much non-Opec oil supply would increase this year, and revised down a little its forecast for next year.
The overall effect is that the Opec Secretariat’s forecast for demand for its members’ crude is revised down by 200,000 barrels per day (bpd) for this year and next, to 29.5 million bpd and 29.2m bpd, respectively.
Referencing secondary sources – which include the IEA and specialised news organisations – its report said Opec supply last month rose 231,000 bpd to 30.35m bpd.
The key question now is whether the Arabian Gulf swing producers will bow to pressure to cut their supply to market or whether they will wait it out to see if there is better economic news on the horizon to push demand, and prices, higher. These producers have effectively been operating independently since 2011 when the Opec quota system broke down.
The Opec Secretariat is a think tank funded by the producers’ group.
amcauley@thenational.ae
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