OPEC said in its monthly report released today that its November production rose by 230,000 bpd from the previous month to average 31.70 M/bpd, the highest since April 2012. The 13-member group (Indonesia rejoined last Friday) is producing approximately 900,000 bpd more than it expects will be needed next year. “In 2016, demand for OPEC crude is forecast at 30.8 M/bpd, an increase of
1.5 M/bpd over the current year and unchanged from the previous assessment.”
Here are some key takeaways from OPEC’s December Monthly Market Report:
No More Quota
In our previous coverage of these reports over the last year, we’ve added “north of the group’s 30 M/bpd recommended output quota.” But after last Friday’s meeting in Vienna, this quota no longer exists. While the group’s decision last week officially reaffirmed the group’s strategy to produce at current levels, in reality, absent the quota system, OPEC’s members are now free to produce as they please. This new policy of doing nothing to change the status quo is reflected in OPEC’s outlook for next year, which sees its own production rising and that of non-members declining. It is full steam ahead for OPEC’s market share battle.
Iraq Production Up
According to external sources cited in the report, Iraqi output rose by 247,500 bpd to 4.3 M/bpd last month. OPEC didn’t give a reason for the increase.
According to the IEA (whose monthly report will be released tomorrow), Iraq has pushed production to record levels in 2015 as IOCs develop its southern oilfields. At the same time, semi-autonomous Kurdistan continues to boost independent oil sales in the north.
In October, according to Iraq’s Oil Ministry, Iraq output had fallen as inclement weather postponed southern loadings and as flows through the KRG pipeline in the north were disrupted.
Meanwhile, OPEC’s report indicated that output in Saudi Arabia dropped by 25,200 bpd to 10.13 M/bpd last month.
Non-OPEC Supply Contraction
The 13-member group (Indonesia reentered last week) said in the monthly report that non-OPEC oil supply growth was forecast to be “much lower” in 2015 and 2016 following “the tremendous growth of 2.23 million barrels a day achieved in 2014.”
While non-OPEC oil supply was estimated to grow by 1.00 M/bpd this year to average 57.51 M/bpd, the report expects a slowdown in non-OPEC oil production in 2016. OPEC says US oil production has been slowing since last April.
“For 2016, non-OPEC oil supply is now expected to contract by 380,000 barrels a day to average 57.14 mb/d, following a downward revision of 0.25 mb/d,” from the previous month’s report. A decline in US production accounts for about half this drop, OPEC said.
Demand Seen Rising In 2016
As non-OPEC supply is projected to fall, OPEC raised its forecast for global oil demand growth in 2015 and next year. For 2015, OPEC sees demand increasing by 1.53 M/bpd to average around 92.88 M/bpd. That’s a 30,000 barrel increase from October’s forecast.
The 13-member group expects oil demand to increase by around 1.25 M/bpd to average 94.14 M/bpd in 2016, increasing its forecast principally because of “better-than-expected consumption in Europe and Other Asia.”