This decline reflects the continued oversupply in the market with crude and product storage at record highs.
Taking a look at the economy, global economic growth in 2015 is set to be 3.1 percent. This is slightly lower than that forecast at the last Conference, mainly due to a deceleration in some emerging and developing countries. Next year looks brighter, with global growth forecast to be 3.4%.
OPEC expects that World oil demand in 2015 will grow by 1.5 million barrels per day, up from 1 million barrels per day in 2014. Next year, they foresee growth of 1.3 million barrels per day to average 94.1 million barrels per day, with most of this growth coming from non- OECD countries. As far as supply is concerned, nonOPEC countries will continue to see significantly reduced production growth as compared to past years. In fact, in 2016, they anticipate a contraction in non-OPEC oil supply.
This downward trend stems mainly from the impact of investment cutbacks and the drop in US tight oil output, which has been declining since May of this year. This is clearly illustrated by the drop in the number of newly drilled wells and the reduction by half of active drilling wells.
These developments indicate the onset of a more balanced market in 2016, with demand for OPEC crude expected to rise by 1.2 million barrels per day to average 30.8 million barrels per day for the year. A balanced and stable market will be of crucial importance in the years ahead to ensure continued investment in the industry as it gears up to meet the world’s burgeoning energy needs.
So the opening address from OPEC set the scene for their thinking, some optimism all round culminating in the need for a “balanced and stable market” which only OPEC can created by cutting output. In spite of any informed conjecture before an OPEC Meeting, very few really know for sure what will happen.
One can argue afterwards that the members had no other option, but, as we learnt last December, there is always the chance of a last-minute surprise, often reflected by the size of the media camp that attend these meetings. That decision has resulted in the collapse of the oil price, the rebuilding of stock levels and cuts in capital projects.
I managed to speak briefly to Dr Salah Khebri, Minister of Energy for Algeria. They are investing heavily into solar power as others particularly in North Africa are able to do. His output is around 1.2mbpd and he too would hope to increase on this, as I guess they all would. I then spoke to Jose Maria Botelho de Vasconcelos, Minister of Petroleum for Angola, and his market has moved away from the US which is now down to only 3%, it was closer to 18% earlier in the year and he is selling into Latin America and the Far East. Over the year prices have averaged around the $50 mark and something closer to $70 would be better although he did seem to indicate that the $100 level was not feasible. There is a real acceptance now that more realistic price levels are here to stay.
