LONDON: Global demand for oil from Opec next year will be far below its current output level because of the US shale boom, the group said yesterday, as its top producer, Saudi Arabia, kept silent on whether it will cut output to remove surplus oil from the market.
A lack of public comment from Saudi Arabia on the fall in oil prices to their lowest since 2010 has prompted industry watchers to wonder whether the kingdom may be moving away from a policy of simply managing the market and instead pursuing geopolitical goals. Saudi Oil Minister Ali Al Naimi broke months of silence yesterday to reaffirm the kingdom’s policy of seeking stable global markets, but offered no insight on his response to tumbling crude prices. Oil in October fell below $83 a barrel and yesterday it was hovering around $80, its lowest since 2010.
In a monthly report yesterday, the Organisation of the Petroleum Exporting Countries (Opec) forecast that 2015 demand for its oil will drop to 29.20 million barrels per day (bpd), or almost 1 million bpd less than it is currently producing.
This is the last report before Opec meets in Vienna on November 27 to discuss whether to respond to the drop in prices by cutting output for the first time since the financial crisis in 2008.
The supply surplus looks even larger in the first six months of 2015, as the report estimates the world will require only 28.45 million bpd of crude on average from Opec. “In the first half, the demand will be much less than 29.2 million and so we’ll have a massive oversupply if Opec keeps the same output,” said Carsten Fritsch, analyst at Commerzbank. “That probably explains the steep decline in prices in previous weeks.”
The report by economists at Opec’s Vienna headquarters said Saudi Arabia had told Opec it produced 9.69 million bpd in October, little changed from 9.704 million in September. Reuters
