OPEC sees lower demand for oil in 2018

OPEC said on Wednesday that its oil production jumped in June and forecast world demand for its crude will decline next year as rivals pump more, pointing to a market surplus in 2018 in spite of an OPEC-led output cut.

Giving its first 2018 forecasts in a monthly report, OPEC said the world would need 32.20 million barrels per day (bpd) of crude from its members next year, down 60,000 bpd from this year.

OPEC said its oil output in June rose above the demand forecast, led by gains in Libya and Nigeria, two members exempt from the cut aimed at eliminating excess supply. OPEC officials nonetheless remain upbeat on the outlook.

“We remain very optimistic ... (about) helping the market to rebalance itself,” OPEC Secretary General, Mohammad Barkindo, said at an industry conference in Istanbul.

Oil rose above $48 a barrel on Wednesday as a US report of falling inventories raised hopes that the glut is easing. OPEC referred to an “ongoing rebalancing” of the market.

Under the supply deal, OPEC is curbing output by about 1.2 million bpd, while Russia and other nonOPEC producers are cutting half as much, until March 2018.

OPEC production has increased in recent weeks, in part due to the recovery in Libya and Nigeria, which were exempted from the supply cut as domestic conflict had curbed their output.

OPEC said its output rose by 393,000 bpd in June to 32.611 million bpd, according to figures from secondary sources the organisation uses to monitor supply. The gain was led by Nigeria and Libya, with extra barrels also from Saudi Arabia and Iraq.

The United States is expected to contribute the largest non-OPEC supply gain next year, OPEC said, even though cost inflation and a decline in well productivity will curb Shale oil activity. Canada and Brazil are also expected to boost output.

Should OPEC keep pumping at similar levels to June, the market could remain in surplus next year, the report indicates. The Nigerian and Libyan recovery has prompted talk among producers about asking them to join the supply deal.

Barkindo downplayed expectations that this would be addressed soon, saying a meeting on July 24 in Russia of some OPEC and nonOPEC ministers would discuss Nigerian and Libyan output only at a technical level.