OPEC Forecasts Higher Crude Oil Demand in 2017

In its Monthly Oil Market Report for July, released Tuesday morning, the Organization of the Petroleum Exporting Countries (OPEC) noted that the cartel’s price for its reference basket rose by 6% in June, a fifth consecutive month of rising prices. The basket price rose $2.63 to $45.84 a barrel.

Global demand growth for 2016 remained unchanged from last month’s report at 1.2 million barrels per day, or a daily average of 94.2 million barrels. In its first forecast for 2017 demand growth, the cartel projected growth at 1.2 million barrels a day to average 95.3 million barrels. The bulk of growth is projected to originate in non-OECD countries, which are expected to contribute 1.1 million barrels a day, while OECD demand will rise by 100,000 barrels a day.

The cartel raised its estimate of non-OPEC production for 2016 and now forecasts non-OPEC supply will drop by 900,000 barrels a day and average 56 million barrels a day for the year. The prior estimate called for a production drop of 740,000 barrels a day and an average of 56.4 million barrels a day.

The cartel said OPEC production in June, as reported by secondary sources, rose by 264,000 barrels a day to a daily average of 32.86 million barrels. That total is 130,000 barrels a day higher than an estimate by Platts published on Monday.

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The cartel also raised its estimate of 2016 demand for OPEC crude from 31.5 million barrels a day to 31.9 million barrels a day in the June report. OPEC last changed this estimate in April, when it projected an increase of 1.8 million barrels a day compared with last year.

In its first outlook estimates for the 2017 oil market, OPEC estimates that the non-OPEC supply of crude will drop by 110,000 barrels a day, with the largest declines coming in production from Mexico, the United States and Norway, among others. Demand on OPEC is forecast to average 33 million barrels a day in 2017, up 1.1 million barrels a day compared with current projections for 2016. That is a smaller increase than the 1.9 million barrel jump between 2015 and 2016.

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