x Abu Dhabi, UAESunday 23 July 2017

OPEC sees oil demand slide into next year

Demand for OPEC crude will continue to slide until the middle of next year, despite an improving global economic outlook.

Demand for OPEC crude will continue to slide until the middle of next year, despite an improving global economic outlook, according to the group's latest forecast. But that did not stop its members from collectively raising output last month by another 43,000 barrels per day (bpd) in the sixth successive monthly increase since March. In its October oil market report, released yesterday, OPEC projected a 500,000 barrel bpd drop in demand for its crude in the first six months of next year, to be offset by a modest return to demand growth in the second half of the year. For the full year, OPEC predicted demand for its crude would fall by 210,000 bpd to 28.39 bpd. OPEC economists, however, added about 200,000 bpd to their previous projections for total world oil consumption both this year and next. Even their forecast for demand for OPEC crude was stronger than last month's projections. Due to "the US oil demand bouncing back from a steep historical decline", OPEC now expects world oil demand to shrink by 410,000 bpd this year to 84.24 bpd. Next year, demand should rebound by 690,000 bpd to 84.93 bpd, it predicted. "The world economy now appears to be entering into a new phase, moving from a period of containing the crisis to one of economic recovery," OPEC said. But it also warned that "weak oil market fundamentals as reflected in high global inventories and large OPEC spare capacity" meant that "continued close monitoring of both economic conditions and developments in the oil market" would be needed. Against that backdrop, OPEC members' compliance with the record 4.2 million bpd of production cuts pledged last year has slipped to 62 per cent from more than 80 per cent in March. Other than noting "a considerable increase" last month in output from Nigeria, followed by Angola, and that Venezuelan and Saudi production had fallen, the latest OPEC report did not comment on deteriorating discipline within the group. That could signal a strategic shift by OPEC from efforts to bolster the oil market to preserving market share. "While OPEC has reduced production heavily since last September - which has meant sacrifices from our member countries, in the interests of the overall good of the market - some other producers have done the opposite and increased output, compromising the impact of our measures and eating into out market share," OPEC wrote last month in a commentary published on its website. At its upcoming December 22 meeting, the group would be looking for "meaningful, practical support for its market-stabilisation measures from non-OPEC producers," the statement said. tcarlisle@thenational.ae