OPEC raises demand projection, points to 2018 shortfall

The Organization of the Petroleum Exporting Countries (OPEC) forecast higher demand for its oil in 2018 and said its production-cutting deal with rival producers was getting rid of a glut, pointing to a tighter market that could move into a deficit next year.

In a monthly report, OPEC said the market could find support during the winter from low distillate fuel stocks and forecasts of colder weather, which would boost distillates demand for heating.

OPEC said the world will need 33.06 million barrels per day (bpd) of its crude next year, up 230,000 bpd from its previous forecast. That is its third consecutive monthly increase in the projection from its first estimate made in July.

The report illustrates growing confidence among OPEC officials that its supply cut is working. Still, OPEC is not banking on a surge in prices, saying in the report that crude is expected to remain at $50 to $55 a barrel in the next year.

“With the market moving into the winter season, distillate fuel supplies are notably tight, representing a change from the excess supplies seen in the last two years,” OPEC said.

“OPEC and key non-OPEC oil producers continue to successfully drain the oil market of excess barrels.”

In a deal aimed at clearing the glut, OPEC is curbing output by about 1.2 million bpd until March 2018, while Russia and other non-OPEC producers are cutting half as much.

The 14-country producer group said its oil output in September came in below the 2018 demand forecast, even though production climbed by about 89,000 bpd to 32.75 million bpd.