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OPEC recently released its latest Monthly Oil Market Report, where it found that non-member supply this year is expected to increase by 0.95 MMbbl/d, up from its April forecast of 0.58 MMbbl/d.
“In addition to the growth in the US, higher oil production is expected in Canada (0.22 MMbbl/d) and Brazil (0.21 MMbbl/d), while Mexico and China are forecast to see the largest contractions,” the report said.
The organization encouraged non-member countries to curb their production, and mentioned the growth in US tight oil production several times, noting that the country’s “oil and gas companies have already stepped up activities in 2017 as they start to increase their spending amid a recovery in oil prices.”
“A large part of the excess supply overhang contained in floating storage has been reduced and the improvement in the world economy should help support oil demand. However, continued rebalancing in the oil market by year-end will require the collective efforts of all oil producers to increase market stability, not only for the benefit of the individual countries, but also for the general prosperity of the world economy,” the report continued.
OPEC will convene in Vienna later this month, where it is expected to decide whether it will extend the current production cuts. Today, Kuwait reportedly joined Saudi Arabia and Russia in support of prolonging their output cuts. The latter two nations agreed yesterday to extend their production cuts until March 2018. Oil prices responded accordingly yesterday, rising to their highest point in weeks shortly after experiencing lows unforeseen for about a year.
This morning, Reuters said that oil prices were flat as the market awaited weekly US inventory data and eyed the trio of top producers, noting that Brent was up by 4 cents to $51.86/bbl and US crude was up the same amount to $48.89/bbl.
An analyst firm today reported that OPEC’s coordinated output cut will push the oil market into a 0.5 MMbbl/d supply-demand deficit in 2017 as the cartel seeks to erode record crude oil stockpiles.
The Global OFS team (Douglas-Westwood) at Westwood Global Energy Group expect this will support oil prices at around current levels but was unlikely to lead to a recovery. However, such prices are predicted to be sufficient to support a 5% year-on-year recovery in drilling activity to 2023.
Douglas-Westwood said that within its latest Drilling & Production Market Forecast, major changes have been seen in the country forecasts of the OPEC nations as the organization collectively exceeds its output reduction. The firm also upgraded its onshore US forecast as the country’s shale plays continue to recover well from the downturn.