22 March 2016, Lagos – The Organisation of the Petroleum Exporting Countries, OPEC, weekend, predicted global demand for its crude oil will be less than previously thought in 2016, as supply from rivals proves more resilient to low prices, increasing the excess supply on the market this year.
The monthly report from OPEC contrasts with that of the International Energy Agency, IEA, which last Friday, said producers outside OPEC were cutting production by more than it had expected.
Saudi Arabia in 2014, led a change in OPEC strategy to defend market share instead of cutting output to support prices, hoping to slow growth in rival supplies such as U.S. shale oil.
The move accelerated a collapse in prices, which hit a 12-year low of $27.10 in January.
The price drop has started to slow the development of relatively expensive supply sources such as shale and forced companies to delay or cancel billions of dollars-worth of projects, putting some future supplies at risk.
In the report, OPEC said it still expected supply from outside the group to fall by 700,000 barrels per day, bpd, this year. But it revised up the absolute level of non-OPEC supply in 2015 and 2016, and said producer efforts to maintain output made its 2016 forecast more uncertain.
“There has been a reduction in production costs, mainly in the U.S., as well as increased hedging, with producers choosing to produce with losses rather than stopping production,” OPEC said.
“This has caused the non-OPEC supply forecast in 2016 to become more uncertain.”