Global oil demand up to 32.42 million b/d in 2018: OPEC report
In its monthly report, OPEC forecast an increase in oil demand next year, and argued the oil market was strengthening, partly due to the cartel’s production cut.
According to the report, the world’s consumption of crude will grow to 32.42 million barrels per day (b/d) in 2018, up 220,000 b/d from its previous forecast.
OPEC pointed to physical oil markets in Europe and West Africa that have firmed as well as an increase in the price of Brent crude oil immediate delivery compared to later supplies as a sign that the global glut was flagging.
“The entire forward curve has flattened for Brent amid some bullish indicators in the physical market,” OPEC said in its report. “Crude differentials strengthened notably for a range of key grades in the Mediterranean, North Sea and West African markets.”
On the heels of the release, Brent oil rose to over $53/barrel, but has since fallen back to $52.15 as of 1:33 p.m. EDT.
Currently, OPEC along with a handful of non-cartel oil producing countries have agreed to cut their production by 1.8 million b/d in an effort to curb the global glut of crude. The pact will continue at least until March, 2018 and may be extended should participants agree.
On Thursday, OPEC reported crude inventories in developed countries had fallen by 87 million barrels, compared to the five-year average since the agreement took effect on Jan.1.
“Further declines in U.S. crude stocks are likely, given the record rates at which U.S. refineries are running,” OPEC said.
As well, US refinery use has hit a 12-year high, according to data from the US Energy Information Administration.
OPEC boosted its forecast for global oil demand for the remainder of this year and 2018. The cartel says consumption will rise by 1.28 million b/d in 2018 and OPEC was upbeat about the global economy.
“World economic growth has gained momentum,” OPEC said. “With the ongoing growth momentum and an expected continued dynamic in second-half 2017, there is still some room to the upside.”
But, the report also showed the cartel’s output in July was above its earlier forecast. The boost was due to recovering production in Libya and Nigeria, both OPEC members were originally exempted from the supply cut deal.
In July, OPEC output rose by 173,000 b/d to 32.87 million b/d. The increases were led by Libya, Nigeria and Saudi Arabia. July compliance with the agreement was at 86 per cent, according to Reuters, down from 96 per cent initially reported for June.
According to Reuters, should the cartel continue at its July pace, the market will see a 450,000 b/d surplus in 2018.
