By Sebastine Obasi, with agency report
The Organisation of Petroleum Exporting Countries, OPEC, yesterday, said though its production increased in June, world demand for its crude will decline next year as rivals pump more, pointing to a market surplus in 2018, despite an OPEC-led output cut.
Giving its first 2018 forecasts in a monthly report, OPEC said the world will need 32.20 million barrels per day (bpd) of crude from its members next year, down 60,000 bpd from this year.
OPEC said its oil output in June rose above the demand forecast, led by gains in Nigeria and Libya, two members exempted from the cut aimed at eliminating excess supply. OPEC officials, nonetheless, remain upbeat on the outlook.
“We remain very optimistic (about) helping the market to rebalance itself,” OPEC Secretary-General Mohammad Barkindo said at an industry conference in Istanbul, Turkey.
Oil rose above $48 a barrel, yesterday, as a United States report of falling inventories in the country raised hopes that the glut was easing. OPEC referred to an “ongoing rebalancing” of the market.
Saudi, others pump more
The report also said Saudi Arabia, which earlier this year voluntarily cut production to below its OPEC goal, boosted output to 10.07 million bpd in June, slightly above target.
Supply is rising outside the group as well. OPEC estimated supply from all non-OPEC producers next year will rise by 1.14 million bpd, a sizeable increase from growth of 800,000 bpd this year led by the United States.
Next year’s growth in non-OPEC supply is almost as much as the 1.26 million bpd rise that OPEC expects in global demand, and is even more if OPEC output of natural gas liquids, a type of supply not restricted by OPEC quotas, is included.
The United States is expected to contribute the largest non-OPEC supply gain next year, OPEC said, even though cost inflation and a decline in well productivity will curb shale oil activity. Canada and Brazil are also expected to boost output.
Should OPEC keep pumping at similar levels to June, the market could remain in surplus next year, the report indicates. The Nigerian and Libyan recovery has prompted talk among producers about asking them to join the supply deal.
Barkindo downplayed expectations this would be addressed soon, saying a meeting on July 24 in Russia of some OPEC and non-OPEC ministers would discuss Nigerian and Libyan output only at a technical level.
OPEC production figures in the report are for the now 14-member group. Equatorial Guinea joined in late May.
Caps for Libya and Nigeria Wouldn’t Be Enough to Fix Oil Glut
A proposal that Libya and Nigeria could have to accept limits on their crude production probably wouldn’t be enough to put OPEC’s faltering efforts to eliminate a global supply glut back on track.
The two African nations — exempt from the supply curbs agreed last year due to internal strife — have added enough production in the last two months to offset Saudi Arabia’s cut. Should the pair accept a cap at their desired levels of output, OPEC and allies including Russia would still have to adjust their own quotas to compensate for the increase, said Nordine Ait-Laoussine, president of Geneva-based consultants Nalcosa and former energy minister of Algeria.
“It’s not going to be easy just to say ‘Maybe we should just bring Nigeria and Libya into the line and it will be fine’,” Ait-Laoussine said by phone. Adding those two countries without agreeing on new production ceilings for the other participants in the deal would simply be “exacerbating the problem of excess supply,” he said.