OPEC cuts demand outlook by most in 3 years on US shale

OPEC reduced forecasts for the amount of crude it will need to supply by the most in at least three years as surging North American shale output reduces reliance on the group’s supplies, reports Bloomberg.

The forecast by the OPEC means that officials in Nigeria can no longer live in denial of the seismic shift in the country’s oil fortunes in the midst of the shale revolution and Nigeria must now begin to admit that it will have to become more market-friendly in managing its oil assets.

The Organisation of Petroleum Exporting Countries (OPEC) expects it will need to pump an average of 29.2 million barrels a day of crude next year, 200,000 a day less than it forecast a month ago. The group boosted estimates for supplies from countries outside OPEC by the same amount. The change implies that OPEC’s 12 members would need to cut output by about 1.1 million barrels a day from the 30.3 million they produced in August.

Brent crude futures declined below

$100 a barrel on September 8 for the first time in 14 months amid constrained global consumption, swelling US output and speculation that threats to supply in Iraq, Libya and Russia are fading. US crude production will surge to a 45-year high next year, lowering prices and reducing the need for imports, the nation’s Energy Information Administration said on Tuesday.

“Supply concerns appear to be receding, as geopolitical tension in Ukraine and the Middle East have not led to major supply disruptions,” OPEC’s Vienna-based secretariat said in its monthly oil market report.

OPEC’s 12 members boosted output by 230,900 barrels a day to 30.35 million a day in August as Libya restored disrupted supplies, while Angola and Nigeria boosted production, secondary sources cited by the report showed. Saudi Arabia, the group’s biggest producer and de facto leader, trimmed production by 55,200 barrels a day to 9.86 million a day.

The group made a “marginal downward revision” to its 2015 demand global outlook, projecting that fuel use will increase by 1.19 million barrels a day to an average 92.4 million a day.

“There will be a need to remove barrels in 2015, just as there has been a need to remove barrels in 2014,” Torbjoern Kjus, an analyst at DNB in Oslo, said by phone on Wednesday. “We do see very large stock builds this year. Next year we need to have significant production cuts if we want to avoid further stock builds.”

Non-OPEC producers will increase output by 1.24 million barrels a day to 57.16 million a day in 2015, with the bulk of the growth concentrated in the Americas, according to the report.

OPEC members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The organisation will next meet on November 27 in Vienna.

The International Energy Agency, the Paris-based adviser to oil-consuming nations, will publish its monthly report today.

Businessday