OPEC sticks to its bullish oil demand forecast, but now sees more US output growth

Key Points
  • OPEC raises its forecast for non-OPEC production growth in 2017 and 2018.
  • The 14-member producer group forecasts world oil demand will grow by 1.53 million barrels a day in 2018.
  • OPEC's total production fell by 133,000 barrels a day to 32.45 million barrels a day in November.
People work at the Halfaya oilfield in Amara, southeast of Baghdad.
Essam Al-Sudani | Reuters

OPEC forecasts strong global appetite for crude oil in 2018 but now sees output from the United States and elsewhere growing more than previously expected.

The 14-member oil cartel's latest read on supply and demand comes just two weeks after it agreed to extend output limits with Russia and nine other producer nations. The two dozen producers are capping production to shrink huge global stockpiles of oil that have weighed on prices for more than three years.

The higher supply from outside OPEC could make it harder to achieve that aim, even as OPEC's production fell in November.

The producer group on Wednesday forecast that non-OPEC production will grow by nearly 1 million barrels a day in 2018. That marks an upward revision of 120,000 barrels a day from its previous projection.

"Higher-than-expected supply growth in the U.S., Canada and Kazakhstan have been the key contributors to the upward revisions, particularly U.S. tight oil," OPEC said in a monthly report.

Role of US has changed when it comes to oil, IHS vice chairman says
Role of US has changed when it comes to oil, IHS vice chairman says

U.S oil production has recovered to about 9.7 million barrels a day after hitting a recent bottom of 8.5 million barrels a day in September 2016. The recovery is being driven by growth from U.S. shale fields, also known as tight oil, where producers use advanced drilling methods to extract oil and gas from rock formations.

OPEC hiked its forecast for U.S. output growth in 2018 by 180,000 barrels a day to 1.05 million barrels a day.

"The momentum seen this year is expected to continue in 2018 on the back of increased investment in U.S. tight oil and improved well efficiency," OPEC said.

OPEC also raised its forecast for non-OPEC output in 2017 by 150,000 barrels a day to 810,000 barrels a day.

The group stuck to its bullish forecast for growing oil demand next year. It sees demand growing by 1.53 million barrels per day in 2018, up slightly from last month's forecast.

In November, OPEC's total oil output fell by 133,000 barrels a day to 32.45 million barrels a day, according to independent sources cited in the group's monthly report.

OPEC has gotten a 'lead' on the oil market with output cuts
OPEC has gotten a 'lead' on the oil market with output cuts

The biggest decline came from Angola, where daily production was down nearly 109,000 barrels. There were also substantial declines from top exporter Saudi Arabia and the United Arab Emirates, while Venezuela's output continued its steady slide amid the country's economic crisis.

Nigeria's production jumped by nearly 96,000 barrels a day, partially offsetting those declines. Nigeria and Libya, two OPEC members exempt from the production cutting deal, agreed last month that they will not produce above 2017 levels next year.

Given the higher production from non-OPEC producers, OPEC believes its production will average 33.2 million barrels a day in 2018, slightly above this year's levels.

"Combined with continued efforts by OPEC and non-OPEC to support oil market stability, this should lead to a further reduction in excess global inventories, arriving at a balanced market by late 2018," OPEC said.