OPEC raised its forecast for oil supply from non-member countries this year as higher prices spur U.S. shale drilling, offsetting an OPEC-led deal to cut a glut of crude supply and a sharp decrease in Venezuelan production.
In a monthly oil market report on March 14, the Organization of the Petroleum Exporting Countries projected a year-on-year rise of 1.66 million barrels per day (b/d) in non-OPEC supplies in 2018. That was the fourth straight rise from 870,000 b/d forecast in November.
“For 2018, higher growth is expected on the back of the projected increase in U.S. shale production following a better price environment not only for shale producers, but also for other countries such as Canada, the UK, Brazil and China,” OPEC said of the outlook for non-OPEC supply.
This would lead to “a higher quarterly distribution throughout the year with a record-high level projected for the fourth quarter”, OPEC said.
OPEC, Russia and several other non-OPEC producers, excluding the United States, began to shrink production in January 2017 in a bid to digest a global oversupply of crude that had built up since 2014. They have extended the agreement until the end of 2018.
The move has helped brought up oil prices (LCOc1), which topped $71 a barrel this year for the first time since 2014 and stood near $65 on March 14. But this has also stimulated the shale drilling, counteracting to some extent the curbs’ effectiveness.
The oil minister of Iran said OPEC could agree at its next meeting in June to start easing the curbs in 2019, according to the Wall Street Journal. OPEC should aim for oil around $60 to contain shale growth, he added.
In contrast, Saudi Arabia, the world’s top oil exporter, said in February that it was premature to discuss an exit strategy.
The deal of supply cut held an original purpose to get rid of an oversupply of crude by reducing oil inventories in developed economies to their five-year average. The figures in the OPEC’s report gave a mixed picture on stock movements.
Crude stocks rose by 13.7 million barrels in January to 2.865 billion barrels. Notably, this was only 50 million higher than the five-year average, the closest yet OPEC has come to the predetermined target.
Venezuelan Output Plunges
While rivals are pumping more oil, OPEC’s production in February dropped by 77,000 b/d to 32.19 million b/d, led by drops in Iraq, the United Arab Emirates and Venezuela, according to data OPEC collected from secondary sources.
It's the fifth straight month that the organization is producing less oil.
Venezuela, whose output is dropping amid an economic crisis, accounts for the biggest contribution to the production decline last month, producing 1.586 million b/d in February, a 183,000 b/d decline on month. The number is believed to be the lowest in decades.
With rival producers expected to increase supply by more than demand, OPEC estimated that the global demand for its crude will average 32.61 million b/d in 2018, a 250,000 b/d decrease from last month's projection.
Posted from my blog with SteemPress : https://insights.jumoreglobal.com/oil-supply-from-opec-rivals-surges/