JAKARTA - Organization of the Petroleum Exporting Countries (OPEC) said the global oil market is oversupplied and signaled the glut may increase this year. Supply from OPEC is climbing after sanctions on Iran were lifted and an initiative with Russia and other non-members to tackle a supply glut by freezing output failed last month.
OPEC pumped 32.44 million barrels per day (bpd) in April, the group said in a monthly report, up 188,000 bpd from March. A persistent surplus could weigh on prices, which despite a recovery to $47 a barrel from a 12-year low of $27.10 in January. The price drop is hitting non-OPEC supply as companies have delayed or canceled projects around the world. OPEC forecasts supply from outside producers will decline by 740,000 bpd in 2016 led by the United States, little changed from last month. OPEC cited factors that could lead to a bigger supply drop, such as the impact of wildfires in Canada that have cut production.
The evidence of falling non-OPEC supply should lead to a stronger market next yeae. But OPEC supply has been climbing since the 2014 policy shift led by top two producers Saudi Arabia and Iraq. The return in December 2015 of Indonesia as an OPEC member has also increased total output. It sees demand for OPEC crude averaging 31.49 million bpd in 2016, broadly unchanged from last month’s forecast. The report points to a 950,000-bpd surplus on average in 2016 if OPEC keeps pumping at April’s rate, up from 790,000 bpd implied in last month’s report. (*)