OPEC sees global supply glut clearing in 2017

Rising demand for oil and a supply contraction will likely result in a global glut clearing by 2017, OPEC predicted in its latest monthly report.

World oil demand growth this year is expected to reach 1.2 million barrels per day (mbd), broadly unchanged from last month’s report, the cartel noted, adding that growth will be similar in 2017 at 1.2 mbd.

Demand for OPEC’s crude is expected to average 31.9 million barrels per day mbd this year, an increase of 1.9 mbd over 2016. The cartel projects that figure increasing by 1.1 mbd in 2017.

Supply from non-member countries is forecast to show a stronger contraction of 0.9 mbd to average 56 mbd in 2016, and decline further next year. The drop will be attributed to lower oil output from Canada due to the recent wildfire, while the US, Norway and Mexico will likely also see declines.

As a result of its initial forecasts, OPEC said it expects market conditions to “help remove overall excess oil stocks in 2017.”

The producer group lowered its estimate for global economic growth this year to 3 percent; however, it projects this figure to rise slightly to 3.1 percent in 2017.

Forecasts for major emerging economies were left unchanged for 2016. China and India are seen expanding this year at 6.5 percent and 7.5 percent, respectively. Meanwhile, Brazil and Russia are expected to rebound from a two-year recession and grow marginally by 0.4 percent and 0.7 percent in 2017.

“Among the many uncertainties in the global economy, the near-term handling of the UK exit decision and the consequences this may have on both the UK and the EU, will be a key determinant for the short-term forecast,” OPEC explained.

The OPEC Reference Basket increased by $2.63 to average $45.84 per barrel in June, with ICE Brent gaining $2.28 to reach $49.93 per barrel. 

Write to Jerusha Sequeira at jerusha.s@argaamnews.com and

Joumana Saad at joumana.saad@argaamplus.com