OPEC sees ‘a more balanced market’ – a higher demand for its crude oil in 2016
The Organization of Petroleum Exporting Countries (OPEC) released its Oil Monthly Report (OMR) for July, predicting economic growth would continue to drive oil demand, even as the group revised world economic growth down. OPEC forecasts global GDP to grow by 3.2% in 2015, down from 3.3% in its previous prediction.
In 2016, GDP growth is expected to reach 3.5%, with forecasts showing the OECD expanding by 2.1%, an increase of 0.1% from 2015. OPEC believes that China’s growth will slow to 6.5%, while India is forecast to grow even faster at 7.7%. Both Russia and Brazil are expected to move out of recession next year as well, reports OPEC. The United States is expected to grow 2.4% in 2015, and 2.6% in 2016.
The stronger economic growth will translate into healthier oil demand, according to OPEC. World oil demand in 2015 is expected to grow by 1.28 MMBOPD, up 0.1 MMBOPD from the June OMR. In 2016, OPEC expects global demand to grow by 1.34 MBOPD to 93.94 MMBOPD of demand. Most of this demand growth is expected to come from China, despite the downward revision to the country’s economic growth.
Non-OPEC supply growth has slowed substantially since last year, but the July OMR revised supply expectations from non-OPEC countries up from the beginning of July to average 0.86 MMBOPD from 0.68 MMBOPD. Non-OPEC supply growth is expected to slow even more in 2016, increasing by just 0.30 MMBOPD, according to OPEC.
Total U.S. liquids production is expected to grow by 0.33 MMBOPD in 2016, just one third of the 0.93 MMBOPD of production growth expected this year.
Based on the forecast released in the July OMR, OPEC believes that world oil demand will outpace projected non-OPEC supply and OPEC NGLs, resulting in higher demand for OPEC’s crude oil in 2016. OPEC expects demand for its own crude to increase to 30.10 MMBOPD, up 0.90 MMBOPD from 2015. “This would imply an improvement towards a more balanced market,” the OPEC report read.
Saudi Arabia continues to increase production
OPEC said that Saudi Arabia reported production of 10.56 MMBOPD last month, up 231,000 barrels from May, According to industry data, that would be a record high, reports Reuters. The Saudi’s continued push towards higher production is in line with analyst expectations.
Goldman Sachs and Citi Group both anticipate that OPEC’s largest producer will try to reach its maximum daily output by the end of this year. “If you are Saudi Arabia and you’re looking at the new oil order we live in, you would go to full capacity,” Jeff Currie, head of commodities research at Goldman Sachs in New York said. The lower commodity price environment seen since prices plunged last year has turned un-pumped oil in to a depreciating commodity, according to Seth Kleinman, Citigroup’s head of energy strategy, meaning Saudi is interested in getting as much out of the ground as quickly as possible.
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