London: The Organisation of Petroleum Exporting Countries (Opec) on Friday trimmed forecasts of demand for its own crude over economic concerns and rising output by rivals, a move that makes it likely to significantly cut production next year.
The downgrade, the second such revision in as many days, suggests Gulf producers will be pressured to tighten their spigots when the group meets on December 12 in Vienna.
Opec said in its monthly oil market report that demand for its crude will be about 100,000 barrels a day less than expected next year. While markets will need more oil overall, they will require about 400,000 barrels a day less from the group itself next year-an amount nearly equivalent to the production of Opec’s smallest member Ecuador.
Part of the downgrade stems from lingering economic concerns, which also led Opec to cut its global oil demand forecast for 2013 by about 20,000 barrels a day to 89.57 million barrels a day-though still up about 1 per cent from this year. “The economy is placing a considerable amount of uncertainty on the world oil demand forecast,” the group warned.
But the group, whose members extract more than one in three barrels of oil consumed each day in the world, is also facing mounting competition from new barrels coming from outside the group. The organisation upgraded non-Opec production estimates for next year, mostly due to revised expectations for Australian output.
On Thursday, Opec trimmed a demand forecast for its crude by 1.6 million barrels a day through 2015, as part of a broader downgrade by one million barrels a day for global oil demand in the medium term.
The numbers are likely to inspire some soul searching at Opec’s meeting next month. Though no change is expected for its current production ceiling of 30 million barrels a day, some members could seize on the latest figures to put pressure on Saudi Arabia and other Gulf countries that have ramped up production to make up for lost Iranian output.
Opec’s output is already easing, but it is still producing more than the market needs for next year. Expected demand for Opec crude next year stands at 29.7 million barrels a day. The group said its output fell by 66,900 barrels a day in October to 30.95 million barrels a day, the first time in a year it fell below 31 million barrels a day. The numbers, based on secondary sources such as shipping and oil consultancies, were driven down by lower Iranian and Nigerian output.
Iranian output dropped by to about 47,000 barrels a day, Opec’s secondary sources said, continuing to decline as strict sanctions designed to deter the Islamic Republic from pursuing its nuclear program hit its oil industry. Iran denies a sharp decline in output and pegs it at 3.74 million barrels a day-more than one million barrels a day higher than secondary sources.
Opec output was also hit by Nigeria, down about 109,000 barrels a day due to flooding in the Niger Delta and sabotage targeting oil pipelines.
But Saudi Arabia’s output remains close to its highest level in at least three decades at 9.7 million barrels a day, according to Opec’s secondary sources.
Markets will now be watching out for the oil-market predictions of the International Energy Agency, which represents some of the world’s largest oil consumers, which are due this week.
