For yet another month, OPEC has revised up its expectations for non-OPEC crude oil supply growth this year, expecting-again-U.S. oil production to increase more than previously thought.
In its closely watched Monthly Oil Market Report, OPEC said on Monday that it had revised higher its non-OPEC supply forecast for 2018 by 321,000 bpd from the previous month's report, to average 59.26 million bpd. Non-OPEC supply is now expected to grow at a faster pace, and is expected to increase by 1.4 million bpd in 2018 compared with growth of 860,000 bpd in 2017. The growth has been revised upward by 250,000 bpd from OPEC's previous report. Expectations for higher production in the U.S., the UK, and Brazil, as well as lesser declines in Mexico and China were the main reasons behind the upward revision, OPEC said.
The key growth driver will be the United States, with growth now expected at 1.3 million bpd, revised up by 150,000 bpd compared to the last month's assessment. Other growth drivers outside OPEC will be Canada, Brazil, and the UK, according to the cartel.
While OPEC has been sticking to its production cut agreement, rising oil prices have prompted U.S. shale drillers to add more production and to do so faster than previously expected. Surging U.S. production, coupled with the financial market turmoil last week, sent WTI prices below $60 on Friday.
Related: OPEC Production Steady In January As Venezuela Output Plunges
"According to the most recent assessment, the steady oil price recovery since summer 2017 and renewed interest in growth opportunities has led to oil majors catching up in terms of exploration activity this year, both in the shale industry and offshore deep water," OPEC said.
On the demand side, world oil demand is forecast to reach 98.60 million bpd in 2018, representing growth of 1.59 million bpd, and revised higher by 60,000 bpd from the previous month's projections, mainly reflecting the positive economic outlook. OPEC's major assumptions for this year's oil demand growth are a steady rise in the global economy, increase in transportation fuels-gasoline, jet fuel, and diesel oil, and capacity expansions of petrochemical projects.
"Recently, healthy and steady economic development in major global oil demand centres was the key driver behind strong oil demand growth. This close linkage between economic growth and oil demand is foreseen to continue, at least for the short term," OPEC said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More