The oil market should be more balanced next year as China and the developing world use more oil while supply of fuel from North American shale grows more slowly, OPEC said on Monday.
In its monthly report, the 12-member Organization of the Petroleum Exporting Countries said it expected world oil demand to increase by 1.34 million barrels per day (bpd) in 2016, up from growth of 1.28 million bpd this year, reports Reuters.
World oil demand growth should outpace any increase in oil supply from non-OPEC sources and ultra-light oils such as condensate, increasing consumption of OPEC crude, it said.
“This would imply an improvement towards a more balanced market,” OPEC’s in-house economists said in the report.
OPEC has increased production sharply over the last year as its most powerful member, Saudi Arabia, and other core producers in the Middle East Gulf attempt to build market share, leading to higher inventories worldwide.
OPEC said Saudi Arabia reported that it pumped 10.56 million bpd last month, up 231,000 bpd from May. According to industry data, that would be a record high.
Higher OPEC production has been a major factor behind a collapse in oil prices, which are now around half their levels of a year ago.
Benchmark Brent crude traded around $58.70 a barrel at 1230 GMT on Monday, down from a peak above $115 in June 2014.
Lower prices have squeezed high-cost oil producers and brought a sharp fall in the number of oil exploration rigs in operation, particularly across North America.
OPEC said supply of oil from non-OPEC producers was expected to grow by only 300,000 bpd in 2016, down sharply from growth of 860,000 bpd this year.
U.S. oil output, which has seen rapid increases over the last five years thanks to the development of huge shale resources by “fracking”, is expected to log much more modest supply growth in 2016.
“Total U.S. liquids production is expected to grow by 330,000 bpd, just one third of the growth of 930,000 bpd expected this year,” it said.
That should mean more demand for OPEC oil next year.
OPEC said it expected demand for its own crude to rise by 860,000 bpd in 2016 to 30.07 million bpd. But it cut its estimate of demand for its crude this year by 100,000 bpd to 29.21 million bpd.
The group said it estimated, based on figures from secondary sources, that its own collective crude output rose by 283,000 bpd to 31.38 million bpd in June, led by Iraq, Saudi Arabia and Nigeria.
That is still well ahead of current demand for OPEC oil and should help ensure global inventories continue to build for some time to come.