OPEC says cheap oil to hit rival supply harder in 2016

In its report OPEC said supply outside OPEC is expected to decline by 380,000 barrels per day (bpd) in 2016

OPEC forecast on Thursday that oil supply from non-member countries will fall more sharply next year, a development that would suggest its strategy reaffirmed last week of defending market share not prices is working.

But the Organization of the Petroleum Exporting Countries (OPEC) also said its members pumped more oil in November, adding to a supply glut, and forecast global oil demand growth would slow down next year.

OPEC's report follows an acrimonious meeting on Dec. 4, where it rolled over a policy of pumping crude to safeguard market share.

A year ago, Saudi Arabia pushed though an OPEC decision to defend market share instead of cutting output, hoping to slow growth in rival supplies.Supply outside OPEC is expected to decline by 380,000 barrels per day (bpd) in 2016, the report said, as output falls in regions such as the United States and former Soviet Union. Last month, OPEC predicted a drop of 130,000 bpd.
 

 

"U.S. tight oil production, the main driver of non-OPEC supply growth, has been declining since April 2015," OPEC said in the report. "This downward trend should accelerate in coming months given various factors, mainly low oil prices and lower drilling activities."

OPEC production, which has surged since the policy shift of November 2014 led by record Saudi Arabian and Iraqi output, rose by 230,000 bpd in November to 31.70 million bpd, said the report, citing secondary sources.

The figures do not include Indonesia, which rejoined OPEC at last week's meeting.

With extra barrels coming from OPEC, the report points to a 860,000-bpd supply surplus in the market next year if the group keeps pumping at November's rate, up from 560,000 bpd indicated in last month's report.

OPEC left its 2016 oil demand growth forecast unchanged, predicting global demand would rise by 1.25 million bpd, marking a slowdown from 1.53 million bpd in 2015.