OPEC raised demand forecast for its crude in coming quarters, lifting chances of a market rebalancing as its August production slipped.
The Organization of the Petroleum Exporting Countries (OPEC) raised its forecast by 410,000 barrels per day (bpd) to 32.8 million barrels in 2018, which is also its current production level.
In August, OPEC-nations’ production decreased by 79,000 bpd, according to secondary sources, to average 32.76 million bpd, OPEC said in its monthly report. Crude oil output increased in Nigeria, while production showed declines in Libya, Gabon, Venezuela and Iraq.
The largest decline was from Libya, where production dropped by 112,000 barrels per day to 890,000 bpd, compared to July’s 1.003 million bpd in July. While production in Libya is erratic due to fighting between armed factions, the country is exempt from the cuts OPEC and other countries including Russia, Mexico and Kazakhstan have pledged to.
The agreement called for reducing output by about 1.8 million barrels a day to bring down inventories to their five-year average to conquer an oil glut that has dampened prices for the last two years.
The deal, reached in late 2016, initially called for a six-month period, which later was extended with another nine months until the end of March 2018. The extension was partially because market balancing wasn’t reached but also because of worries that inventories would rise again upon completion of the deal.
Oil ministers are now debating extending the agreement beyond March 2018 for at least another three months.
Extending the production cut agreement for a second time may be crucial as OPEC sees oil demand in the first and second quarter of next year to be lower than its production, suggesting oil inventories will increase once again in the first half of next year.
OPEC pegged demand for its crude at 31.8 million barrels a day in the first quarter, and at 32.4 million in the second quarter.
Data in the report shows that despite demand for OPEC’s oil likely to increase next year, the group won’t be able to reverse curbs on output if it wants to balance the market.
OPEC said it expects higher growth in the second half of 2017 with crude demand at 33.70 million in the third quarter and 33.27 million in the fourth quarter.
“The main factors for higher growth expectations in 2017, as opposed to last year, are the currently improving price environment. Non-OPEC supply is predicted to show mild growth in the second half, compared to the first half. This market development suggests the possibility of more market rebalancing in first quarter of 2018,” OPEC said.