In its Monthly Oil Market Report for December, released Wednesday morning, the Organization of the Petroleum Exporting Countries (OPEC) noted that the cartel’s price for its reference basket rose to $51.67 a barrel (up nearly 20%) last month. This is the first time in 18 months that the reference price has topped $50 a barrel, and it follows the agreement between OPEC and non-OPEC producers to curtail output by about 1.8 million barrels a day through June.
Global demand growth for 2016 increased by 10,000 barrels a day to 1.25 million barrels per day, or a daily average of 94.44 million barrels. The cartel’s projected demand growth for 2017 remained rose slightly to 1.16 million barrels a day to average 95.6 million barrels.
The cartel increased its estimate of non-OPEC production for 2017, forecasting non-OPEC supply will rise by 12,000 barrels a day and average 57.26 million barrels a day for the year.
The cartel said OPEC production in December, as reported by secondary sources, fell by 221,000 barrels a day to a daily average of 33.08 million barrels. The cartel produced 33.09 million barrels a day in December, down from 33.31 million barrels in November
The cartel also lowered its estimate of 2016 demand for OPEC crude from 31.9 million barrels a day in the November report to 31.2 million barrels a day. The cartel now forecasts the demand for OPEC crude at 32.1 million barrels a day in 2017, down by 500,000 barrels since the November report.
OPEC noted the effect of hedge funds on the price of crude in December:
Hedge funds and other institutional investors’ bets on crude oil prices rising hit fresh all-time highs in December, providing additional fuel to ongoing steady gains in prices. Speculator bet on higher oil prices increased significantly over the month as indicated by the exchange traders’ commitment data.
The December report also called attention to a crude oil stockpiles. Total OECD commercial stocks fell in November to stand at 2.99 billion barrels, some 271 million barrels above the latest five-year average. U.S. stockpiles, according to the cartel, fell by 20.7 million barrels to 1.32 billion barrels, about 185 million barrels above the five-year average. China’s total commercial stocks dropped by 3.3 million barrels in November to 363.2 million barrels.
The U.S. dollar is regaining some strength today and that is weighing on crude markets. WTI crude for February delivery traded down nearly 2.2% at $51.32, after settling at $52.48 on Tuesday. Brent crude for March delivery traded down about 2.3% at $54.21, after settling at $55.47 on Tuesday.
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