OPEC’s June Oil Market Report reiterates maintaining stable market share, letting growing demand and non-OPEC production cuts bring balance
OPEC’s decision last November to maintain production in the face of global oversupply came as a shock to many who expected that the organization would defend prices like it had in the past. Prices tumbled, sending economic shockwaves around the globe, including in some of OPEC’s own member nations. In the group’s June Monthly Oil Market Report (OMR), it reiterated its commitment to stable markets, despite the volatility seen following its November decision.
During the most recent OPEC conference, held June 5, the group decided to maintain its production target of 30 MMBOPD, saying that demand would pick up and help alleviate the oversupplied market. OPEC projects demand growing at 1.18 MMBOPD in 2015, bringing total global demand to 92.50 MMBOPD. It believes growing demand, along with stronger global economic growth and production cuts from non-OPEC producers will even out the supply and demand dynamics in the global market.
OPEC’s most recent projections put global economic growth at 2.2% in 2015, with U.S. growth revised down to 2.4% due to lower-than-expected growth in the first quarter. The group also expects oil output to decrease in the second half of the year following growth in the first half, leading to an overall increase in oil production of 0.7 MMBOPD in 2015.
In the June OMR, the group said that it is still committed to market stability, and that it believes 30 MMBOPD is the number to achieve that goal. “Based on these expectations for the second half of the year, the OPEC Conference agreed to maintain its output at 30 MMBOPD and urged Member Countries to adhere to it. In agreeing to this decision, Member Countries confirmed their commitment to a stable and balanced oil market, with prices at levels suitable for both producers and consumers.”
Despite the group’s affirmation of maintaining stability, it has continued to produce over its 30 MMBOPD production quota for 12 consecutive months, with the June OMR placing May production at 30.98 MMBOPD on average. The reintroduction of Iranian oil output could further increase the global oil glut, with Iran expecting to reach pre-sanction levels of production within three months of sanctions being lifted.
From April to May, Algeria, Angola, Iraq, Nigeria, Qatar, Saudi Arabia, the UEA and Venezuela all increased their production. Ecuador, Iran and Kuwait all reported lower production in the June OMR. Libya was not reported in either month due to ongoing conflicts in the country.
Stability remains a focus for the group though, the OMR said. “Market stability remains a common objective for all market participants, attainable through cooperative effort,” OPEC said in the report. OPEC plans to continue monitoring markets and will reassess its position at its next conference on December 4, 2015.