OPEC expects the world oil market to be balanced by late 2018 as its deal with other producers to cut output reduces excess oil in storage, even as the US and other producers outside the group pump more crude.
The Organization of the Petroleum Exporting Countries, in a monthly report, cut its estimate of global demand for its crude in 2018 by 270,000 barrels per day (bpd) to 33.15 million bpd, in part because of higher US supply.
But the 14-country producer group said its oil output in November, as assessed by secondary sources, was below the 2018 demand forecast at 32.45 million bpd, a drop of about 133,000 bpd from October.
The report follows the November 30 decision by OPEC, Russia and several other non-OPEC producers to extend their oil output-cutting deal until the end of 2018 to finish clearing a global glut of crude that built up from 2014.
“This should lead to a further reduction in excess global inventories, arriving at a balanced market by late 2018,” OPEC said in the report.
Oil prices added to an earlier gain after the report was released to trade near $64 a barrel, close to their highest since 2015, supported by the OPEC-led effort and an unplanned shutdown of a British oil pipeline. The price of crude is still about half its level of mid-2014.
In a further sign excess supply is easing, OPEC said inventories in developed economies declined by 37 million barrels in October to 2.948 billion barrels, 137 million barrels above the five-year average.
OPEC’s stated goal is to reduce stocks to the five-year average.
OPEC’s production figures based on the secondary sources showed compliance with the supply cuts increased in November from already high rates.
Adherence by the 11 OPEC members with output targets has risen to 121 per cent, according to a Reuters calculation, higher than October’s level which was still above 100 per cent.
The figures that OPEC members reported themselves showed some unexpectedly large declines in production.
The UAE, which has lagged many of its peers on compliance this year, said it cut output by 50,000 bpd. The improvement in compliance comes as the country prepares to take over the rotating OPEC presidency in 2018.
Top exporter Saudi Arabia disclosed a large cut of 165,000 bpd, taking output further below its OPEC target, and Venezuela, where economic collapse is starving the oil industry of funds, reported a 118,000 bpd drop in output.
Should OPEC keep pumping at November’s level and other things remain equal, the market could move into a deficit of about 700,000 bpd next year, suggesting inventories will be drawn down further to meet demand.
Last month’s report pointed to a larger deficit of about 830,000 bpd.