EMEA News
OPEC Predicts Tighter 2017 Market; Saudi Arabia Said to Be Attempting to Prop It Up
The Organization of the Petroleum Exporting Countries (OPEC) in its latest monthly report reiterates its prediction that crude demand in 2017 will be greater than its current production - but it also thinks Brexit and other factors will slow the pace of demand growth.
The cartel pegs the 2017 rise in global oil demand at 1.15 million barrels per day (bpd), slightly less than this year's expected growth of 1.19 million bpd.
Meanwhile, OPEC's oil output rose 264,000 bpd to 32.86 million bpd in June, and it predicts that demand for its crude next year will average 32.98 million bpd – meaning unless OPEC increases output further, a supply deficit could occur.
For the record, an S&P Global Platts survey released earlier this week estimated OPEC's June production rate to be 32.73 million bpd, and even though this is slightly less than the cartel's official figure, it is still the highest amount of output since August of 2008 – and has observers wondering if talk of a production cap will revive should this level be maintained.
The OPEC report reveals an average surplus of 1 million bpd for 2016, but rising demand coupled with supply from outside producers expected to decline by 110,000 bpd in 2017 (compared to an 880,000-bpd drop this year) "will help remove overall excess oil stocks in 2017."
While OPEC seems to be taking the prospect of a tighter 2017 market in stride, OPEC delegates told Reuters that its top exporter, Saudi Arabia, could be preparing for the future by trying to prop up the market.
As evidence they point to Khalid al-Falih, oil minister for the kingdom, recently stating that an oil price between $50 and $100 is needed to achieve a balance in oil markets in the long term: "This a change in the Saudi position," said a Middle East OPEC delegate.
"Before, they did not mention a range of prices they were looking for; they are looking for a higher price, but they want a moderate price."
Another delegate told Reuters, "For sure, a decent price of oil is needed to have enough investment to avoid a supply crunch and a boom in prices a few years from now.
"It is good that the Saudis are realising [this], but after a huge loss for oil exporters."
The International Energy Agency (IEA) last month echoed OPEC's contention that world oil production in 2017 will nearly match consumption and thus end several years of oversupply; however, Bloomberg pointed out that for a shortfall to be avoided, OPEC members - many of whom are struggling to maintain current production - will "have to pump an extra 650,000 barrels a day over the year."
