(recasts, clarifying 6th paragraph)
LONDON (ICIS)--The recent softening of crude oil prices was halted towards the end of September as a result of the decision made by OPEC to restrict production to between 32.5m and 33m bbl/day, the cartel said on Wednesday.
OPEC took the decision to put a cap on production because of “economic uncertainties and weaker than desired global growth,” said its secretary general Mohammad Sanusi Barkindo at a recent G-24 Ministerial Meeting.
The decision seems to have had immediate success with ICE Brent nearing the $50/bbl level. “The development was seen as the first step of a process, with concrete action being discussed further over the next two months, potentially also including a contribution from non-OPEC producers, particularly Russia,” OPEC said in its latest Monthly Oil Market Report.
“Oil prices were also supported after US government data showed a surprise drop in domestic crude stockpiles for four weeks in a row.”
This month’s report detailed that world oil demand is seen increasing by 1.24m bbl/day to average 94.40m bbl/day, the result of a marginal upward revision of approximately 10,000 bbl/day from the September report.
The positive revisions were due mainly to expectations of a stronger performance in H216 from OECD America as well as higher-than-expected demand in the Other Asia region.
OPEC’s expectations for world oil demand in 2017 remain unchanged, with a 1.15m bbl/day rise anticipated, resulting in an average demand of 95.56m bbl/day.
In terms of supply, non-OPEC oil supply is likely to contract by 0.68m bbl/day as a result of a downward revision of approximately 70,000 bbl/day from September.
Non-OPEC supply for 2017 was revised up slightly by 40,000 bbl/day to show growth of 0.24m bbl/day to average 56.54m bbl/day, as a result of new projects coming on stream in Russia.
Having seen GDP growth projections downgraded for the global economy in OPEC’s September Monthly Oil Market Report, they remain unchanged this month.
OPEC expects that a 2.9% expansion in the world economy will be seen in 2016, which is down from the 3% forecast in August.
The world economy is also expected to expand in 2017, with OPEC projecting a GDP growth of 3.1%, which is unchanged from last month’s report.
“While 1H16 was exceptionally weak, given low growth in the US and Japan, growth is expected to pick up in the second half and continue to gather more momentum in the coming year,” said the crude-oil producing cartel.
Following contractions of 3.4% and 0.6% this year, Brazil and Russia are forecast to grow by 0.4% and 0.7% respectively in 2017.