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Opec sees decline in call on its crude in 2018: Update

12 Jul 2017 13:00 (+01:00 GMT)
Opec sees decline in call on its crude in 2018: Update

Adds Barkindo comment

London, 12 July (Argus) — Demand for Opec's crude will be squeezed in 2018 by growth in North American production and higher Opec NGLs output.

Opec sees demand for its crude at 32.2mn b/d in 2018, 100,000 b/d lower than the forecast for this year, which is for 300,000 b/d year-on-year growth.

Giving its first forecasts for 2018 supply and demand, the Opec Monthly Oil Market Report (MOMR) sees demand growth next year as slightly lower than for 2017. It puts growth in 2018 at 1.26mn b/d, down from 1.27mn b/d in 2017, a forecast unchanged from last month's report. OECD growth next year is seen at just 200,000 b/d.

Total demand in 2018 is forecast at 97.65mn b/d, against 96.38mn b/d this year.

Although OECD commercial stocks in May stood 234mn bl above their five year average, according to the MOMR, Opec secretary general Mohammed Barkindo, speaking in Istanbul, remained confident of market rebalancing. He said: "We remain optimistic that we are on course to achieving our common objective to achieve the market balance that has eluded us since 2014, and to do that we have to address the variable of stocks, which is impacted by the variable of supply." He said he expects stock drawdown to accelerate in the second half.

The report puts non-Opec supply growth in 2018 at 1.14mn b/d, much higher than the 800,000 b/d growth expected this year. Opec NGLs production in 2018 is forecast to average 6.49mn b/d, up by 180,000 b/d on 2017. Some of this growth is caused by Equatorial Guinea joining Opec.

Demand growth in 2018 will again centre on non-OECD Asia, with China's demand seen rising by 310,000 b/d and India's by 160,000 b/d. US demand is seen rising by 180,000 b/d, with most other OECD countries anaemic.

The non-Opec supply growth figure for this year is revised down by a marginal 50,000 b/d, leaving output at 57.87mn b/d. Of the 800,000 b/d non-Opec increase in 2017, the US accounts for 730,000 b/d. This dominance is also pronounced next year, with the US forecast accounting for 860,000 b/d of the 1.14mn b/d rise. Brazil's output is seen rising by 220,000 b/d and Canada and Russia both put on 170,000 b/d. China and Mexico see declines.

Of the increase in US production, tight crude is expected to account for 625,000 b/d of growth, up from 538,000 b/d growth this year.

A compilation of secondary source data, including from Argus, published in the MOMR puts Opec production 393,500 b/d up in June on May, at 32.61mn b/d. Nigeria and Libya — which are not party to Opec cuts — see rises of 96,700 b/d and 127,000 b/d, respectively. Saudi Arabia's output is put 51,300 b/d up at 9.95mn b/d.

Data supplied to the Opec secretariat by member countries lack too many submissions for approximations of a total to be possible. But Nigeria says it produced 168,800 b/d more in June than in May and Saudi Arabia puts its own production at 10.07mn b/d, up by 190,000 b/d and slightly above the 10.06mn b/d average it is pledged to over the period of the cuts agreement. But it has been well below that level in previous months and the summer is a very high demand period for domestic consumption.