OPEC Cuts Demand Forecast for 2015: Black Gold Loses Its Shine
OPEC Cuts Demand Forecast for 2015: Black Gold Loses Its Shine
Persistently low prices can slow down shale growth in the year 2015 and international demand forecast for this year by OPEC has been cut down on this basis.
Dark Days Ahead For Black Gold
OPEC has predicted that the global demand for crude in 2015 will be lower than expected and far below its current output, as per the group’s forecast on 10th December, 2014. This is a massive supply surplus without any output cuts or slowdown in the US shale boom.
The Organisation of the Petroleum Exporting Countries/OPEC forecast demand for oil will fall to 28.92 million barrels each day (bpd) in the year 2015 which is a reduction of 280,000 bpd from its earlier expected estimate. It is also one million bpd less than what is now being produced.
The report is a antecedent to the OPEC decision last month not to increase output cuts and prop up prices. Top oil exporter Saudi Arabia encouraged fellow members to battle US shale growth. US shale requires more high prices to be economic and it is depleting the market share of OPEC.
The November 27th decision taken by OPEC for the retention of output target of 30 million bpd has sent prices plummeting, as per media reports. Brent crude trades below USD 66 a barrel which is close to a 5 year low and down by as much as 40% since the month of June. Based on a weaker outlook for Europe and Asia, the report has cut down on the forecast for global demand growth next year. Higher supply growth from shale and non OPEC sources have been predicted by OPEC as well. The group said this may experience a slowdown if prices remain weak.
“Should the current fall in crude prices continue over a longer period, it will impact the non-OPEC supply forecast for 2015, especially anticipated growth in tight crude,” OPEC's report has indicated, using tight crude to denote shale oil.
All That Glitters is Not Black Gold
OPEC’s report has also indicated that OPEC will be pumping 30.05 million bpd in the month of November, as per secondary sources cited by the report. There will also be a surplus of 1.13 million bpd next year and 1.83 million bpd in the first half of the year.
Secondary source figures indicate that OPEC output has fallen by 390,000 bpd from the month of October, mainly due to unrest in Libya and minor reductions in Kuwait and Saudi Arabia. OPEC has been informed by Saudi Arabia that the latter has lowered production by 80,000 bpd which is probably indicative of lower domestic demand in power plants and not cut in exports.
OPEC has indicated that non OPEC supply will rise by 1.36 million bpd in the next year led by the US. The rise in the forecast up 120,000 bpd from last month’s report has also been noted. Demand is expected to rise by 70,000 bpd less than previously considered by the producer group. Global demand for OPEC crude in the year 2015 is said to fall to the lowest level in more than 10 years, as per Bloomberg. The noted news and analysis media group also reported that Kuwait offered new discounts to Asian customers while Saudi oil minister queried the need for a output cut. The largest 3 members of the group, Iraq, Kuwait and Saudi Arabia are offering oil to Asia at the lowest discounts in 6 years. Clearly, clean energy is here to stay.
