Oil glut go­ing but growth not over a bar­rel: OPEC

Muscat Daily - - BUSINESS -

Paris, France - The OPEC oil car­tel said on Wed­nes­day it sees the glut in oil sup­plies that has ham­mered crude prices dis­ap­pear­ing as global eco­nomic growth picks up, but costs are ex­pected to re­main sta­ble.

In its reg­u­lar monthly report, the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries, said that ‘in­creas­ing ev­i­dence that the oil mar­ket is head­ing to­ward re­bal­anc­ing’ had led to in­creases in oil prices last month.

OPEC’s ref­er­ence bas­ket price for a price for a bar­rel of oil hit US$53.44 in Septem­ber, its high­est value since July 2015.

The car­tel raised its fore­casts for global oil de­mand due to the im­prov­ing out­look for eco­nomic growth, which in­creases thirst for crude and other sources of en­ergy.

OPEC now sees the global econ­omy grow­ing by 3.6 per cent this year and by 3.5 per cent in 2018, an in­crease by a tenth of a per­cent­age point.

In­creas­ing de­mand for oil will be matched by added sup­plies, but OPEC’s fore­casts for the bal­ance of sup­ply and de­mand fore- see a greater re­liance on the car­tel’s out­put.

Its data for this year show that de­spite in­creas­ing out­put in real terms by its mem­bers as well as non-mem­bers, the small rise in OPEC pro­duc­tion left the mar­ket in deficit in re­cent months to soak up the glut of sup­plies.

Oil prices tum­bled from over US$100 in 2014 af­ter OPEC na­tions led by Saudi Ara­bia cranked up pro­duc­tion to try to push out US shale pro­duc­ers which have higher pro­duc­tion costs.

Af­ter oil tum­bled be­low US$30 last year, OPEC shifted strat­egy with the pro­duc­tion pact that has seen prices re­cover to fluc­tu­ate in the US$50-55 range.

OPEC’s fore­casts see that in 2018 that both ris­ing de­mand and non-OPEC out­put will leave room for its mem­bers to pump more and re­duce the glut in sup- plies.

How­ever it doesn’t see prices climb­ing soon.

‘Oil prices are ex­pected to re­main at US$50-55 per bar­rel in the next year’, OPEC said.

‘A rise above that level would en­cour­age US oil pro­duc­ers to ex­pand their drilling ac­tiv­i­ties, oth­er­wise the lower prices could lead to a re­duc­tion’ in investments, it added.

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