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Oil prices steady as Saudis pump more; OPEC sees strong demand

12 October, 2017, 00:43 | Author: Paula Vaughn
  • Brent Crude

OPEC nations promised production cuts, which have helped firm prices, but supply has not fallen enough to really drive oil prices higher.

Rising supply from the US and from other producers outside of the deal, as well as recovery of production in exempt OPEC members Libya and Nigeria, have been offsetting much of the OPEC/non-OPEC production cuts.

Brent crude futures LCOc1 were trading down 14 cents, or 0.3 percent, to $56.47 per barrel by 12:32 p.m. EDT (1232 GMT). Last month, it expected a 590,000 bpd year-over-year increase to 9.84 million bpd.

"With the market moving into the winter season, distillate fuel supplies are notably tight, representing a change from the excess supplies seen in the last two years", OPEC said.

Barkindo stressed, however, that the oil market is a global one. The API usually releases the weekly report every Tuesday, but this report is scheduled to release on Wednesday due to the USA federal holiday on Monday, October 9, 2017. "Between the first half and second half this year, demand growth is nearly about 2 million barrels (per day), which is very robust", he said.

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For 2018, oil demand is expected to rise by 420,000 bpd vs 400,000 bpd previously.

The report also cited headwinds in 2018 for an expansion of supplies in USA shale, such as lower drilling efficiency and cost inflation. OPEC does not issue price forecasts. "A rise above that level would encourage USA oil producers to expand their drilling activities, otherwise the lower prices could lead to a reduction in their capex".

USA output was curtailed during last year's market downturn, though shale oil production in general has been more resilient to lower crude oil prices than anticipated.

He also said Nigeria and Libya, who were exempted from the pact, "are making progress towards full recovery" of production, after which they could join the OPEC-led agreement.

The report's OPEC production figures mean compliance with the supply cut by the 11 members with output targets remains high at 98 percent, according to a Reuters calculation. Saudi Arabia and Russian Federation, he said, are leading the initiative to bring in more producers. Should Opec keep pumping at similar levels to September, the market could move into a deficit next year, the report indicates.

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