OPEC sees the oil market balancing later this year, leaving its forecast largely unchanged.
In its latest Oil Market Report, OPEC projects that the global surplus in oil production will shrink to just 160,000 barrels per day in the third and fourth quarter as demand continues to rise and supply declines.
OPEC says that oil demand will rise by 1.2 million barrels per day (mb/d), a steady projection that is unchanged from earlier this year. China and India account for the bulk of the increased demand.
On the supply side, production will continue to fall. Non-OPEC supply will fall by 740,000 barrels per day this year, which is mostly unchanged from previous assessments but encompasses revisions to the production levels of individual countries. For example, OPEC revised down its projection for production from Canada, Brazil and Colombia but increased its forecast for output from the U.S., the UK, Russia and Azerbaijan. Non-OPEC supply will fall just 140,000 barrels per day in the second half of the year compared to the first, but will be down by about 1 mb/d from 2015 levels. Related: Oil Is Set To Rally Beyond $50
OPEC sounds relatively sanguine about the trajectory of the oil market balancing. Falling supply and rising demand "should result in a more balanced oil market toward the end of the year." It notes that oil prices have climbed because of supply disruptions, a decline in U.S. output, strong demand, and a weaker dollar. OPEC's projections hinge on steady global economic growth.
But oil prices fell back below $50 per barrel to start off the week on concerns over an economic slowdown in Asia. Also, worries over a potential "Brexit" grew as new polls showed that support for the UK to leave the European Union has increased since the last poll was taken. "The most recent oil price increase was driven by bullish market sentiment," Commerzbank analyst Carsten Fritsch told Reuters. "A Brexit could turn market sentiment around." The dollar gained on the news, which helped to push oil prices lower.
By Charles Kennedy of Oilprice.com
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