Home News OPEC Cuts Production Amid the Slowing Demands

OPEC Cuts Production Amid the Slowing Demands

After dropped below US$50 a barrel on Tuesday, oil price boosted by the Organization of the Petroleum Exporting Countries (OPEC) and its allies further output cuts in the coming meeting - Photo by OPEC

JAKARTA (TheInsiderStories) – Organization of the Petroleum Exporting Countries (OPEC) cut the oil production to 30.81 million barrels oil per day (bpd) in January followed the slowing demands, In a monthly report released on Tuesday (02/12), the members agreed to slashed its production almost 800,000 bpd last month.

In a written statement, the Joint Ministerial Monitoring Committee (JMMC) said these voluntary production adjustments will continue to be monitored by the committee on a monthly basis. The JMMC calls on all participating countries of the ‘Declaration of Cooperation’ to redouble their efforts in the full and timely implementation of the supply adjustments to ensure that the oil market remains in balance in 2019.

The OPEC and JMMC predicts the demand for world oil until 2023 will decline even though energy demand is getting higher amid the global economic expansion. The fall in demand for OPEC crude is caused by strong oil supplies from non-OPEC countries, especially oil supplies from the United States.

Previously, OPEC Secretary General Mohammad Sanusi Barkindo said that the past year had been a historic one for the organization, as well as the global oil industry, with the historic ‘Declaration of Cooperation’ that helping accelerate the return of balance to the global oil market, bringing more optimism to the industry, which in turn, has had a positive effect in the global economy and trade worldwide.

OPEC added, the US is still the largest source of supply in the medium to long term. The US contributes to two-thirds of additional supplies driven by soaring oil production levels.

As is well known, America has pushed its oil production to a record level of 11 million barrels oil per day (mb/d) in recent years as new technology revolutionizes shale oil production and opens up reserves that were previously considered uneconomical.

In addition, the US also imposed sanctions on OPEC members, Venezuela and Iran, which pushed Brent oil prices closer to the highest level since 2014 at around $80 per barrel, and spurred US producers to increase production.

OPEC has revised the prospect of growth in crude oil and non-OPEC production in 2023 to four million barrels oil per day (MBOD), higher than last year’s report. It said non-OPEC would produce 66.1 MBOD of crude oil and liquid fuel by 2023, up from 57.5 million barrels oil per day (BPD) in 2017.

Meanwhile, the US is projected to increase oil production to 13.4 million BPD by 2023, from 7.4 MBOD in 2017 so that total US output reaches 20 MBOD, said OPEC. This will make the US, after becoming the largest crude oil importer, will also be able to meet its own oil needs.

As a result of these changes, OPEC crude demand is predicted to decline to 31.6 MBOD by 2023, from 32.6 MBOD in 2017. In its 2017 report, OPEC expects crude oil demand to be around 33 MBOD in the mid-2020s.

Nevertheless, OPEC still believes global oil demand will begin to recover and continue to rise to reach 40 MBOD in the next 2040. Moreover, OPEC sees global oil consumption until 2020 will reach 101.9 MBOD, up 1.2 MBOD from estimates in last year’ report.

Meanwhile, global oil demand in the longer term is expected to increase by 14.5 MBOD to reach 111.7 MBOD in 2040, slightly higher than last year’ forecast. In the long run, OPEC still hopes to maintain a balance between global market share and oil supply, especially in conditions of abundant and cheap reserves to be extracted.

Total primary energy is set to expand by a robust 33 percent between 2015 and 2040, driven predominantly by developing countries, which see almost 95 percent of the overall energy demand growth. Meanwhile, demand growth is driven by non-OECD regions, which see a huge increase of around 23 MBOD to 2040. Its added, there is no expectation for peak oil demand over the forecast period to 2040.

Furthermore, OPEC said, long-term demand growth comes mainly from the petrochemicals (4.5 MBOD), road transportation (4.1 MBOD) and aviation (2.7 MBOD) sectors. The total vehicle fleet – including passenger and commercial vehicles – is projected to increase to around 2.4 billion in 2040.

It said, the majority of the growth continues to be for conventional vehicles, but the long-term share of electric vehicles in the total fleet is projected to expand and reach a level of around 13 percent in 2040, supported by falling battery costs and policy support.

Non-OPEC liquids supply is forecast to increase by more than 9 MBOD between 2017 and 2027, with the major driver being US tight oil, but beyond this period non-OPEC supply is set to decline by around 4 MBOD.

The demand for OPEC crude is projected to increase to around 40 MBOD in 2040, up from 32 MBOD in 2018. While, the share of OPEC crude in the global oil supply is estimated to increase from 34 percent in 2017 to 36 percent in 2040.

OPEC said, global refinery additions are projected mainly in developing regions, led by the Asia-Pacific and the Middle East, but also Africa and Latin America. Fast evolving trade patterns for crude oil and refined products will continue to evolve, driven initially by additional flows from the US & Canada, and in the long-term by the Middle East, mostly attributed to increasing imports to the Asia-Pacific.

Talking about investment, OPEC sees, in the period to 2040, the required global oil sector investment is estimated at $11 trillion.

The price of OPEC basket of fourteen crudes stood at US$61.40 a barrel on Monday, compared with $61.37 the previous Friday, according to OPEC Secretariat calculations.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com