OPEC made the deepest cut to its forecast for oil-supply growth from countries outside the group in at least six years, saying a price rout means U.S. drillers will produce less than previously anticipated.
Non-OPEC nations will pump about 400,000 barrels a day less than previously estimated, according to a report from the Vienna based Organization of Petroleum Exporting Countries on Monday. It’s the biggest reduction since at least the start of 2008, according to data compiled by Bloomberg. It was led by a 130,000 barrels-a-day decrease from the U.S. while Colombia, Canada and Yemen estimates were also trimmed.
Oil has rebounded more than 20 percent in the past two weeks in London as a seven-month price slump pressured U.S. drillers to idle rigs and companies from Royal Dutch Shell Plc to Chevron Corp. to curb spending plans. U.S. oil explorers have cut the number of rigs in operation to the lowest in three years, according to data from Baker Hughes Inc.
“The main factors for the lower growth prediction in 2015 are price expectations, a declining number of active rigs in North America, a decrease in drilling permits in the U.S. and a reduction in the 2015 spending plans of international oil companies,” OPEC’s Vienna-based research department said in its monthly market report.
Brent crude climbed as much as 2.2 percent, or $1.26, to $59.06 a barrel on the ICE Futures Europe exchange in London, before paring its gains. The international benchmark capped its biggest two-week gain in 17 years on Feb. 6 on speculation that a reduction in U.S. drilling would curb production growth.
U.S. producers idled 83 rigs last week, cutting the total number in operation to 1,140, the lowest since December 2011, data from Baker Hughes Inc. showed Feb. 6.
U.S. oil supply will increase 820,000 barrels a day in 2015 to 13.64 million a day, about half the gain recorded in 2014, according to the report. The estimate for total non-OPEC supply growth in 2015 was cut by 420,000 to 850,000 a day, with Colombia accounting for the second-biggest reduction after the U.S. Non-OPEC supply will still expand to 57.09 million barrels a day in 2015.
While the organization increased estimates for the amount of crude it will need to provide this year, as a result of weaker non-OPEC growth, the 29.2 million barrels a day required remains about 1 million a day below its current output.
Production from OPEC’s 12 members slipped by 53,000 barrels a day in January to 30.15 million a day because of losses in Iraq, according to external sources cited by the report. Iraq’s production dropped by 279,100 barrels a day in January to 3.35 million a day, according to the report.
Global oil demand will increase by 1.17 million barrels a day, or 1.3 percent, in 2015 to 92.32 million barrels a day, according to the report.