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OPEC Reports Rising Output, Sees Lower Demand For Its Oil In 2018

OPEC

OPEC’s crude oil production averaged 32.61 million bpd in June, up by 393,000 bpd over May, and the cartel’s first look into the 2018 oil market points to demand for OPEC crude at 32.2 million bpd next year, down by 100,000 bpd compared to this year.

In its Monthly Oil Market Report released on Wednesday, OPEC said that crude oil output within the cartel last month increased mostly in Libya, Nigeria, Angola, Iraq, and Saudi Arabia, while production showed declines in Venezuela.

According to secondary sources, Saudi Arabia’s crude oil output rose by 51,300 bpd to 9.950 million bpd in June. Saudi Arabia itself has reported to OPEC that its output jumped by 190,000 bpd, to 10.07 million bpd, which is above the 10.058 million bpd ceiling it had pledged to keep under the output cut deal, and which confirms reports from earlier this week that Riyadh told OPEC that it had pumped above its quota.

Apart from Saudi Arabia, the other notable increases in crude production last month were the two producers exempt from the cuts – Libya and Nigeria – which continue to recover production. Libya’s output jumped by 127,000 bpd to 852,000 bpd, while Nigerian crude production rose by 96,700 bpd to 1.733 million bpd. Angola and Iraq were the other two producers that raised output. But while Angola’s 66,000-bpd increase in production took its output to 1.668 million bpd—below the 1.673 million bpd quota under the deal—Iraq’s production rose by 60,600 bpd to 4.502 million bpd, versus 4.351 million bpd quota under the deal. As per OPEC’s secondary sources, Iraq has not fully complied with its share of the cuts in any of the six previous months since the agreement took effect.

The market is probably tired of compliance and OPEC output, and may be looking into signs for longer term supply/demand forecasts.

For 2018, OPEC sees non-OPEC oil supply growing by 1.14 million bpd, higher than the 800,000 bpd growth expected for 2017, to average 58.96 million bpd.

“On a country basis, the main contributors to growth next year are expected to be the US with 0.86 mb/d, Brazil with 0.22 mb/d, Canada with 0.17 mb/d, and Russia with 0.17 mb/d. Leading the declines in non-OPEC oil supply will be Mexico with 0.17 mb/d and China with 0.16 mb/d, mainly due to an absence of new projects and heavy declines in mature fields. US shale output is expected to be somewhat impacted by cost inflation and a decline in well productivity as operators expand production beyond so-called ‘sweet spots.’ Continued production ramp-ups support supply in Brazil, while Canada is also forecast to expand its oil output, particularly from oil sands,” OPEC said.

Related: ‘’U.S. Rig Count Must Drop 150 For Oil Markets To Balance’’

“Based on the above forecasts, projected non-OPEC supply and OPEC NGLs growth will slightly outpace incremental world oil demand, resulting in demand for OPEC crude in 2018 of 32.2 mb/d. This represents a decline of 0.1 mb/d from the current year, which compares to an expected increase of 0.3 mb/d in 2017 over a year earlier,” the cartel said.

Global oil demand growth in 2017 is expected at around 1.27 million bpd, broadly unchanged from previous month, to average 96.4 million bpd. In 2018, world oil demand growth is seen at 1.26 million bpd, slightly lower than this year, and broadly in line with the average growth seen over the last five years, to total 97.65 million bpd, according to OPEC.

By Tsvetana Paraskova for Oilprice.com

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