LONDON (ICIS)--OPEC crude oil output dropped in August, the cartel said on Tuesday, for the first time in several months, while projected global economic growth for the year was revised up.
OPEC crude production dropped 79,000 bbl/day month on month in August to average 32.76m bbl/day, on the back of lower output in Libya, Gabon, Venezuela and Iraq helping to offset an increase in oil pumped in Nigeria during the period.
Global oil supply also declined during the month, according to preliminary estimates, OPEC added, with a 0.32m bbl/day average fall in non-OPEC output driving a 0.41m bbl/day month on month drop to an average of 96.8m bbl/day. Representing a decline from June levels, the figure is 1.66m bbl/day higher than supply in August 2016.
The group also increased its forecast for global economic growth in 2017 by 0.1 percentage points to 3.5%. This could drive firmer oil demand growth, according to OPEC secretary general Mohammad Sanusi Barkindo.
“Alongside this positive [OPEC cut agreement] conformity story and the ongoing destocking process, another optimistic indicator going forward is global oil demand growth,” he said, speaking at the Oxford Energy Seminar in the UK on Monday.
“It is estimated to increase by close to two million barrels a day from the first to the second half of this year,” he added.
US output capacity has also been cut for at least a short period by the impact of Hurricane Harvey on the country’s oil hub of Texas.
Hurricane Harvey led to the disruption of around 0.8m bbl/day of production on the US Gulf production, significantly less than the 1.4m bbl/day output curtailed during Hurricane Katrina in 2005, representing 95% of capacity in the region.
Offshore production has also been quicker to return than during Katrina, OPEC said, but noted that the timeline for the onshore Eagle Ford play to come fully back onstream remains uncertain due to flooding in the region, the group added.
World oil demand growth for the year was revised up 50,000 bbl/day to around 1.42m bbl/day due to better than expected demand and economic growth for OECD countries, while growth for 2018 was projected up 70,000 bbl/day from previous estimates, OPEC added.
While demand may be stronger than expected and oversupply falling, a worry for industry remains the prospect of underinvestment as a result of producers reducing their capital expenditure budgets in a bid to return to profit following the drop in oil pricing in 2014, according to Barkindo.
“While investments are expected to pick up slightly this year and in 2018, it is clear that this is not anywhere close to past levels and it is more evident in short-cycle, rather than long-cycle projects, which are the industry’s baseload. Additionally, we should remember that the actual volume of conventional oil discovered across the globe has halved over the past four years, compared to the previous four-year period,” he said.
“As we have all learned from previous price cycles, such pronounced and long-term declines in investments are a serious threat to future supply. But given our projected future demand for oil, the world simply cannot afford a supply crunch.,” he added.