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OPEC refuses to cut output pushing higher-cost oil producers out of the market

Wednesday, September 16th 2015 - 09:18 UTC
Full article 3 comments
The cartel expects demand for its crude next year to average 30.31 million barrels per day (bpd), up 190,000 bpd from last month The cartel expects demand for its crude next year to average 30.31 million barrels per day (bpd), up 190,000 bpd from last month

The monthly report from the Organization of the Petroleum Exporting Countries said a weaker outlook for China would contribute to slower global oil demand growth next year. “U.S. oil production has shown signs of slowing,” OPEC said in the report. “This could contribute to a reduction in the imbalance of oil market fundamentals, however, it remains to be seen to what extent this can be achieved in the months to come.”

 OPEC said it expected demand for its crude next year to average 30.31 million barrels per day (bpd), up 190,000 bpd from last month, despite the slower demand growth overall due to a weaker outlook for Latin America and China. Oil is trading below $50 a barrel, less than half its level of June 2014. But OPEC has refused to cut output, seeking to recover market share by slowing higher-cost production in the United States and elsewhere that had been encouraged by OPEC's former policy of keeping prices near $100.

OPEC expects oil supply from non-member countries to increase by 160,000 bpd next year, a sharp slowdown from growth of 880,000 bpd in 2015. The predictions are, respectively, 110,000 bpd and 70,000 bpd less than forecast last month. The 2016 forecast for U.S. tight oil production, also known as shale, was reduced by 100,000 bpd. OPEC's move follows the U.S. government's downward revision of domestic output announced in August.

But OPEC did not go as far as the International Energy Agency, which on Friday said lower oil prices would force non-OPEC to cut output by the steepest rate in more than two decades next year. OPEC also expects the recent strength in oil demand growth to moderate. It sees world oil demand growth slowing to 1.29 million bpd in 2016 - down 50,000 bpd from last month, from 1.46 million bpd in 2015. “For 2016, projections for oil demand development in China are slightly lower than anticipated in last month's report amid expectations of slower economic activity than previously assumed,” OPEC said.

The report said OPEC members continue to boost supplies. According to secondary sources cited by the report, OPEC pumped 31.54 million bpd in August - up 13,000 bpd from July and 2.19 million bpd more than its prediction of the demand for its crude this year.

Despite the higher demand it expects for OPEC crude in 2016, the report points to a 1.23 million bpd supply surplus in the market next year if the group kept pumping at Augusts' rate. Saudi Arabia, the driving force behind's OPEC's refusal to cut output, told OPEC it trimmed production to 10.27 million bpd in August, a further decline from June's record rate.

Top Comments

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  • ChrisR

    Some 'experts' are suggesting that the operators of North Sea Rigs need to be able to cope with U$D15 per barrel break even.

    Not so long ago oil was U$D115 per barrel.

    How does any business cope with that except ANCAP in Uruguay who have yet to drop the cost of fuels. That's the answer: make it a monopoly!

    Yeh, the rest of the world has moved on a bit but signing up for three years at MADuro's prices really fucked things up and the twat that did that while he was in charge of ANCAP is now our Veep and if the 'mature' President croaks in office he will get to be President!

    You really couldn't make this shit up.

    Sep 16th, 2015 - 01:44 pm 0
  • jakesnake

    Maduro is sweating bullets right now.... pobrecito.

    Sep 16th, 2015 - 03:32 pm 0
  • Pugol-H

    Opec can force prices down, but have lost control of up.

    Shale wells can be drilled in a matter of days and have a much shorter lifespan than conventional ones.

    Easy to let production run down, very quick and easy to ramp production up again, when required.

    Oil prices look set to keep falling.

    Sep 16th, 2015 - 06:50 pm 0
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