JEDDAH — Demand for oil will rise during 2015, OPEC said in its Monthly Market Report issued April 16. “Higher global refinery runs, driven by increased (summer) seasonal demand, along with the improvement in refinery margins, are likely to increase demand for crude oil over the coming months,” the report said.
OPEC forecasts demand at an average of 29.27 million barrels per day in the first quarter 2015, a rise of 80,000 bpd from its previous prediction made in its March report. At the same time, it said, OPEC's own total output will increase by only 680,000 barrels per day, less than the previous expectation of 850,000 barrels per day, due to lower US and other non-OPEC production.
At its November meeting in Vienna, its members agreed to maintain production at 30 million barrels per day despite falling prices caused by an oversupply of oil.
Average global oil prices began plunging in late June 2014 from more than $110 per barrel to a low of around $50 in January. They've now settled to around $60, and Laurence Fink, the CEO of Black Rock, the world's largest asset manager, said in an interview April 16 on CNBC that the price of a barrel of oil probably would go no lower than $60 this year, but also rise no higher than $80.
The initial oversupply came mostly from a boom in US shale production, which was turning Americans from OPEC's biggest customer into a competitor. But shale oil extraction requires hydraulic fracturing, or fracking, which is more expensive than conventional drilling and isn't profitable if the price of oil falls below a threshold of about $60 per barrel.
The US producers are beginning to feel that price pinch, the OPEC report said, quoting data gathered by Baker Hughes, the large US oilfield services company, that the oil rig count in the United States fell by 238 in March, leaving a total of only 1,110 rigs operating in the country as of March 15. It also pointed to a declining number of drilling permits.
As a result, OPEC said, it expects that US supplies of oil will increase to around 13.65 million barrels a day in this year's second quarter, but then flatten and begin to turn down for the rest of the 2015. This applies to Canadian production as well. “US tight oil and Canadian oil sands output are expected to see lower growth following the recent strong declines in rig counts,” the report said.
OPEC produced 30.79 million barrels of oil per day in March, 800,000 more barrels than in February, the report said, citing not its own members but independent sources including industry sources, oil analysts and shippers.
As for global demand for OPEC's own crude oil, the report said it would rise only marginally to an average level of about 29.3 million barrels a day this year. “Almost two thirds of 2015 oil demand growth is seen coming from China, Other Asia [Indonesia, Malaysia, the Philippines and Thailand] and the Middle East,” the report said.
Meanwhile, it said, worldwide demand for non-OPEC oil is expected to drop by about 165,000 barrels per day to 680,000 barrels per day.
Oil prices fell towards $62 a barrel on Monday on a strong dollar and as Saudi Arabian Oil Minister Ali Al-Naimi said production would stay around 10 million barrels per day (bpd) in April.
Brent crude LCOc1 was trading down $1.20 at $62.25 by 1147 GMT, down from an intraday peak of $64.34. US crude for May delivery CLc1 was down 74 cents at $55 a barrel, down from an early high of $56.65.
The dollar was up 0.47 percent against a basket of currencies. A strong greenback makes dollar-traded commodities like crude oil less attractive for holders of other currencies.
Production in the world's biggest crude exporter would stay near record peaks around 10 million bpd in April, Saudi Arabian Oil Minister Ali Al-Naimi told Reuters on Monday in Seoul, where he is due to attend a board meeting of the state oil firm Saudi Aramco.
"I have said many times we will always be happy to supply to our customers with what they want. Now they want 10 million," he said.
Naimi earlier this month said Saudi Arabia produced 10.3 million bpd of crude in March, eclipsing a previous record of 10.2 million bpd, in what is seen as a move to defend market share against non-OPEC competition, including the United States.
US oil drilling rigs fell for a record 19th straight week to the lowest since 2010, data from oil services firm Baker Hughes showed, which has helped lift prices from six-year lows reached in January.
Since the beginning of April, oil prices have risen around 17 percent, pushed up by reports of a possible dip in US output, but Morgan Stanley warned that Saudi production could be more important than developments in the United States.
"We worry about the market's fixation on the US ... OPEC production may be more important as production increased 1 million barrels per day month-on-month in March. Saudi Arabia alone added the equivalent of half of Bakken (the largest US shale oilfield) production in a matter of months – far beyond any US slowdown," the bank said in a note.
Hedge funds and other money managers raised their net long positions to a record 263,578 contracts in the week to April 14, according to data from InterContinental Exchange (ICE) (ICE.N) released on Monday. — SG/Agencies
