In its latest monthly Oil Market Report (OMR), Opec has predicted that there will be a larger surplus in the oil market in 2017 from non- members as new fields come on stream. It added that apart from new oil fields coming on stream, the anticipated glut in the oil market will be further buoyed by US shale producers, who have refused to be forced out of the market by prices.
According to Opec, the booming output from shale oil fields had pushed the global market into oversupply in 2014, with prices plummeting from a peak of $115 per barrel in June 2014 to an all-time low of $27 per barrel in January this year. Prices later recovered to a 2016 peak of $52 per barrel in June before it dropped, hovering around $47 yesterday after it had approached $50 per barrel at the weekend, following a drop in the US inventory data to nearly a two-decade low.
Prices above the $40 per barrel range would encourage the high cost shale producers to boost output, while a price range below $40 would force the shale producers out of the market and prompt Opec and non-Opec to mull production cuts as oil companies cut spending. Shale producers have proved more resilient to cheap oil than expected, thus fuelling a concern of larger surplus next year.
According to Opec’s OMR, the demand for crude from its members will average 32.48m barrels per day (bpd) in 2017, down from the previous forecast of 33.01m bpd. Opec revised up its 2016 and 2017 supply forecasts from non-members, citing factors including the start-up of Kazakhstan’s Kashagan oilfield and a lower-than-expected decline in US shale output and said the immediate outlook was for more production.
Opec expects supply from non-members to rise by 200,000 bpd in 2017, versus a previously forecast 150,000 bpd decline. This revision is mostly due to Kashagan, as the long-delayed giant field finally starts up.
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