OPEC Downsizes 2016 Forecast for its Global Crude Demand

OPEC says overall demand for oil, including non-member sources, will increase.

Global economic uncertainty is one of the reasons that has caused the Organization of the Petroleum Exporting Countries (OPEC) to reduce its 2016 demand forecast for its crude by 100,000 barrels per day (bpd) compared to its February estimate, to 31.5 million bpd.

At the same time, the cartel in its Monthly Oil Market Report for March predicts that overall demand growth for oil, including from non-OPEC sources, remains unchanged, at 1.25 million bpd.

While non-member supply is expected to decline by 700,000 bpd this year, changes such as a reduction in production costs, mainly in the U.S., along with producers choosing to produce with losses rather than stopping production had caused the non-OPEC supply forecast in 2016 "to become more uncertain."

In its take of the global economy, OPEC writes that  "the risk to global economic growth remains skewed towards the downside" and that "many country-specific economic challenges remain and geopolitical issues – and their potential to spill over into the real economy – may add to this risk."

While low oil prices and possible economic improvements could support demand in Europe sometime this year, the report points out that "unsolved budget deficits in several countries - and policies aimed at increasing fuel taxation - pose substantial downside risks."

OPEC has also lowered its demand forecast for Latin America and former Soviet Union countries, and it warns of a "larger than expected contraction" this year for the Brazilian and Russian economies.

However, preliminary data from the U.S. leads OPEC to believe that "strong growth in gasoline and jet fuel requirements" will more than make up for what it calls "sluggish" distillate demand due to an overall mild winter.

Yesterday Ship & Bunker reported that there had been further setbacks for output freeze talks aimed at bolstering prices.