OPEC on Tuesday forecast higher demand for its oil in 2018 and pointed to signs of a tighter global market, indicating its production-cutting deal with non-member countries is helping to tackle a supply glut that has weighed on prices.
In a monthly report, the Organization of the Petroleum Exporting Countries said the world would need 32.83 million barrels per day (bpd) of OPEC crude next year, up 410,000 bpd from its previous forecast.
OPEC said inventories were falling and that an increase in the price of Brent crude for immediate delivery to a premium to that for later supplies, known as backwardation, raised hopes that a long-awaited rebalancing of the market is under way.
“This is due to the shooting up of demand for prompt-loading barrels and amid increasing sentiment that the oil market will rebalance over the next year with a major drawdown in crude and product stocks,” OPEC said in the report.
“This first stirring of backwardation since oil prices were above $100 a barrel is seen as a sign of tightening supplies and strong demand.” Oil added gains after the report was released, trading above $54 per barrel. Prices are still less than half their levels in mid-2014.
In a deal aimed to clear the supply glut, OPEC is curbing output by about 1.2 million bpd, while Russia and other non-OPEC producers
are cutting by half as much, until March 2018. Ministers are now discussing extending the pact by at least three months.
OPEC in the report also said its oil output in August came in below the demand forecast as output fell by 79,000 bpd from July to 32.76 million bpd.
OPEC and other producers including Russia, Mexico and Kazakhstan pledged to reduce output by about 1.8 million barrels a day to eliminate a global surplus that was weighing on prices. The deal, reached in late 2016, initially called for a six month period, which later was extended with another nine months until the end of March 2018.
OPEC and its allies are discussing a further roll over now ahead of a ministerial meeting scheduled for late November in Vienna, with a three-month extension seen as a minimum, the people said.
AUGUST OUTPUT FALLS
OPEC’s estimate of its oil production is expected to show a decrease in August from July as the group’s biggest member Saudi Arabia
pared output, according to a person familiar with the matter.
The 12 members of the Organization of Petroleum Exporting Countries bound by its agreement to cut output pumped 30.004 million barrels a day in August, based on information from four of six secondary sources, according to the person, who asked not to be identified for lack of authorization to speak to
media. OPEC produced 30.113 million barrels a day in July, according to all six external data sets known as secondary sources.
Saudi Arabia pumped 10.022 million barrels a day in August, the secondary sources show, down from 10.049 million barrels a day in July.