Growth in non-OPEC oil output to keep crude prices in check

OPEC expects non-OPEC crude supply to grow 0.85 mn barrels/day to 57.16 million barrels/day

The unravelling of crude oil prices has been the biggest story of 2014. A combination of factors have led to crude oil prices correcting sharply. While demand-supply mismatches happen to be a big reason for the fall, increase in output from non-OPEC oil producing countries have also played a big role in price movements. 

The Organization of Petroleum Exporting Countries in its monthly oil market report dated 16 March has given an indication of demand-supply conditions that are expected to play out in 2015. The cartel of oil producing countries says that it has seen price of the OPEC Reference Basket average at $54.06/barrel in February, representing a gain of 22 per cent, on higher demand and expectations that oil prices have hit a bottom. 

The monthly report says that there are no changes to global growth forecasts, as the forecast for the world has stayed stable at 3.4 per cent in 2015. The OPEC monthly report estimates world oil demand growth in 2014 to remain at 0.96 million barrel/day. "For 2015, global oil demand growth is expected to average 1.17 million barrel/day, relatively unchanged from the previous month. Almost half of 2015 oil demand growth is projected to come from China and the Middle East." 

However, supplies are expected to play a crucial role as far as prices are concerned. Over the last few years, crude oil production from non-OPEC countries has been steadily on the rise. Most production estimates have been revised upwards, as output has beaten estimates on most counts. Even in the fourth quarter of 2014, output outpaced expectations. Now non-OPEC oil supply growth is estimated at 2.04 million barrels per day. In 2015, non-OPEC oil production is expected to grow by 0.85 million barrels per day. OPEC's natural gas liquids (NGLs) are expected to grow by 0.19 million barrels per day. The cartel does not expect demand for its crude to come under pressure even as production from non-OPEC countries has been steadily increasing. 

Non-OPEC supplies of crude oil has averaged at 56.33 million barrels per day in 2014, achieving the highest growth rate since the emergence of US tight oil and unconventional NGL ouput in the US. According to OPEC's monthly report on oil markets, non-OPEC oil supply for 2015 is projected to average 57.16 million barrels/day, representing growth of 0.85 million barrels/day – mostly in first half of 2015 – unchanged compared with the previous assessment amid several upward and downward revisions. Steady supplies from non-OPEC countries should keep prices under check in 2015 too.