Global demand for oil from Opec next year will be far below its current output level because of the US shale boom, the group said yesterday, as its top producer, Saudi Arabia, kept silent on whether it will cut output to remove surplus oil from the market.
Oil in October fell below $83 a barrel and on Tuesday reached $80.46, its lowest since 2010.
In a monthly report yesterday, the Organisation of the Petroleum Exporting Countries (Opec) forecast that 2015 demand for its oil will drop to 29.20mn bpd, or almost 1mn bpd less than it is currently producing.
This is the last report before Opec meets in Vienna on November 27 to discuss whether to respond to the drop in prices by cutting output for the first time since the financial crisis in 2008.
The supply surplus looks even larger in the first six months of 2015, as the report estimates the world will require only 28.45mn bpd of crude on average from Opec.
“In the first half, the demand will be much less than 29.2mn and so we’ll have a massive oversupply if Opec keeps the same output,” said Carsten Fritsch, analyst at Commerzbank. “That probably explains the steep decline in prices in previous weeks.”
The report by economists at Opec’s Vienna headquarters said Saudi Arabia had told Opec it produced 9.69mn bpd in October, little changed from 9.704mn in September.
Opec also kept its main oil demand and supply forecasts unchanged. The group expects growth in world demand to accelerate to 1.19mn bpd in 2015 from 1.05mn bpd in 2014 and is fairly upbeat about the outlook. “With economic indicators pointing to a continued recovery in the global economy, any additional improvement in the economies of major oil consuming countries should help the demand trend to pick up further,” Opec said.
However, the demand for Opec crude is still expected to fall in 2015 by 245,000 bpd, unchanged from last month, as higher supply outside the group, particularly in the US, squeezes the group’s market share.
With Opec pumping 30.25mn bpd in October, according to secondary sources cited by the report, there will be a surplus of close to 1mn bpd in 2015, and 1.8mn bpd in the first half, if Opec keeps output unchanged.
According to the secondary-source figures, Opec output fell by 226,000 bpd from September and Saudi output edged down by 70,000 bpd, largely in line with the 50,000 bpd Saudi reduction found by an October 31 Reuters survey.
Opec members including Kuwait have said a cut in output at the Vienna meeting is unlikely, but privately delegates are starting to talk of the need for some action, although they warn an agreement will not be easy to reach.