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OPEC cautious on oil outlook despite end of global glut

Reuters  |  LONDON 

By Alex Lawler

LONDON (Reuters) - said the market outlook in the second half of 2018 is highly uncertain even though the group's figures show a global glut has ended, suggesting talks next week on relaxing a supply cut deal won't be straightforward.

OPEC, and other non-producers have been cutting output since January 2017 to get rid of excess supply and boost prices. The deal's goal was originally to reduce inventories in developed nations to that of the five-year average.

In a report on Tuesday, the Organization of the Exporting Countries said those inventories in April fell to 26 million barrels below the five-year average. That's down from 340 million barrels above the average in January 2017.

With hitting $80 a barrel this year, the highest since 2014, and are discussing raising output. But disagrees and has voiced restraint, pointing to a tough policy meeting on June 22-23 in

in the report was cautious on the outlook for the rest of 2018, citing a faster-than-expected rise in non-OPEC production and the chances of global demand weakening.

"Recent developments in the have led to pronounced uncertainty about the second half of the year," OPEC said in the report.

"While in the U.S., and shows some upside potential, downside risks might limit this potential going forward."

Oil pared an earlier decline after the report was released trading just above $76 a barrel.


While the main goal of the supply deal was to reduce to the five-year average, ministers have said other metrics should be considered, also suggesting they are in no hurry to end supply cuts.

The report said OPEC members were still cutting much more than needed, even though output in May rose slightly and top exporter is boosting supply.

OPEC output climbed by 35,000 barrels per day to 31.87 million bpd, OPEC said, according to figures it collects from secondary sources. That is almost 900,000 bpd less than the amount OPEC says the world needs from the group this year.

Figures reported directly by OPEC members showed some bigger rises in production. told OPEC its output rose to 10.03 million bpd, up 161,000 bpd from April, although this is still below Riyadh's OPEC target.

Venezuela, whose plunging output due to an economic crisis has helped boost OPEC compliance with the deal, told OPEC production rose by 28,000 bpd to 1.533 million bpd. April's figure was the lowest in decades.

Strong demand due to a robust economy has helped remove the glut. OPEC left its global demand growth estimate this year unchanged at 1.65 million bpd and said would surpass 100 million bpd for the first time during the fourth quarter.

But the higher prices that have followed the OPEC-led deal have prompted growth in rival supply and a flood of U.S. shale. OPEC expects non-OPEC supply to expand by 1.86 million bpd this year, about 130,000 bpd more than expected last month.

OPEC said there is a "wide forecast range" of 1.7 million bpd in estimates of the amount of crude the group needs to pump in the second half, meaning demand could be significantly more or less than members' current output.

"This outlook for the second half of 2018 warrants close monitoring of the factors impacting both world and non-OPEC supply that will shape the outlook of the going forward," OPEC said.

(Editing by Dale Hudson/David Evans)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, June 12 2018. 19:14 IST