OPEC expects 鈥榬ebalancing process鈥
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OPEC said yesterday that it expects a 鈥渞ebalancing process鈥 to begin in 2016 as the sharp fall in the oil price causes production from non-cartel competitors such as the US to fall after seven years of 鈥減henomenal鈥 growth.
If the prediction is accurate, it would make a victory of sorts for OPEC鈥檚 strategy of keep the oil flowing despite crude sliding to below US$30 a barrel 鈥 from over US$100 in 2014 鈥 to defend its market share.
鈥淭he analysis indicates that 2016 will be a supply-driven market. It will also be the year when the rebalancing process starts,鈥 the Organization of the Petroleum Exporting Countries said in its January report.
鈥淎fter seven straight years of phenomenal non-OPEC supply growth, often greater than 2 million barrels per day, 2016 is set to see output decline as the effects of deep capex (capital expenditure) cuts start to feed through,鈥 it said.
It hiked by 270,000 barrels per day to 660,000 barrels per day its forecast for the drop in 2016 non-OPEC production to 56.21 million barrels per day.
鈥淣on-OPEC marginal barrel production in the next six months will be sensitive to sustained low oil prices, whereby its break-even point would not be able to tolerate the price conditions at that time,鈥 it said.
OPEC鈥檚 forecast for global oil demand growth this year was tweaked slightly upwards to 1.26 million bpd to reach 94.17 million bpd.
For December, OPEC said global oil supply fell 340,000 bpd to average 95.2 million bpd. Non-OPEC supply shed by 130,000 bpd and OPEC supply by a faster 210,000 bpd, cutting OPEC鈥檚 share of global production to 33.8 percent from 33.9 percent the previous month.
Oil prices, which plunged below US$28 a barrel early yesterday, have fallen sharply in recent months due to the slowdown in the Chinese economy and the prospect of Iran returning to the market after last July鈥檚 nuclear deal.
Despite a minor recovery in London trade, oil prices were trading below US$30 per barrel yesterday after the US and EU lifted sanctions on Iran after last year鈥檚 nuclear deal with big powers came into force.
Iran is now free to start shipping crude, adding to a supply glut, which 鈥 along with weak demand and a slowing global economy 鈥 has slashed prices by about three quarters since mid-2014.
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