OPEC sig­nals greater oil glut in 2016 as its out­put surges

Pakistan Observer - - ECONOMY WATCH -

LONDON—OPEC said the global oil mar­ket is over­sup­plied and sig­nalled the glut may in­crease this year, as surg­ing out­put from its mem­bers makes up for losses from other coun­tries whose pro­duc­tion has been hit by a price fall. Sup­ply from the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries (OPEC) is climb­ing af­ter sanc­tions on Iran were lifted and an ini­tia­tive with Rus­sia and other non-mem­bers to tackle a sup­ply glut by freez­ing out­put failed last month.

OPEC pumped 32.44 mil­lion bar­rels per day (bpd) in April, the group said in a monthly re­port cit­ing sec­ondary sources, up 188,000 bpd from March. This is the high­est since at least 2008, ac­cord­ing to a Reuters re­view of past OPEC re­ports. “Fun­da­men­tally, over­sup­ply still per­sists,” OPEC said in the re­port pub­lished. “Oil out­put re­mains high.” A per­sis­tent sur­plus could weigh on prices, which de­spite a re­cov­ery to $47 a bar­rel from a 12-year low of $27.10 in Jan­uary, are less than half their level in mid-2014. OPEC’s 2014 strat­egy shift to de­fend mar­ket share against higher-cost ri­val out­put helped deepen the de­cline.

The price drop is hit­ting non-OPEC sup- ply as com­pa­nies have de­layed or can­celed projects around the world. OPEC fore­casts sup­ply from out­side pro­duc­ers will de­cline by 740,000 bpd in 2016 led by the United States, lit­tle changed from last month. OPEC cited fac­tors that could lead to a big­ger sup­ply drop, such as the im­pact of wild­fires in Canada that have cut pro­duc­tion. The ev­i­dence of fall­ing non-OPEC sup­ply should lead to a stronger mar­ket next year, it said.

“Out­side the US, there have been con­sis­tent signs of de­clines in non-OPEC pro­duc­tion, which should likely flip the global oil mar­ket into a net deficit in 2017.” But OPEC sup­ply has been climb­ing since the 2014 pol­icy shift led by top two pro­duc­ers Saudi Ara­bia and Iraq. The re­turn in De­cem­ber 2015 of In­done­sia as an OPEC mem­ber has also in­creased to­tal out­put. So far this year, Iran is driv­ing the growth. Tehran had re­fused to join the sup­ply freeze ini­tia­tive and the deal fell apart on April 17 in Doha af­ter Saudi Ara­bia in­sisted Iran took part. OPEC left its fore­cast that world oil de­mand will rise by 1.20 mil­lion bpd this year un­changed.—Agen­cies

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.