OPEC Trims 2016 Estimates for Rival Supplies as U.S. Oil Suffers

OPEC Cuts Oil Forecast From Nonmembers
  • Group still expects non-OPEC output to expand slightly in 2016
  • OPEC sees signs U.S. production responding to investment drop

OPEC trimmed estimates for supplies from outside the group in 2016 as the slump in prices takes its toll on the U.S. shale-oil industry.

The Organization of Petroleum Exporting Countries cut 2016 estimates for non-OPEC output by 110,000 barrels a day, its Vienna-based secretariat said Monday in its monthly market report. Still, the group sees non-OPEC supply expanding slightly next year, while the International Energy Agency on Friday predicted a contraction of 500,000 barrels a day, the biggest since 1992. Saudi Arabia told OPEC it curbed output in August to a six-month low.

“There are signs that U.S. production has started to respond to reduced investment and activity,” OPEC said in the report. “Indeed, all eyes are on how quickly U.S. production falls.”

West Texas Intermediate crude futures have tumbled more than 50 percent in the past year, triggering an unprecedented cutback in drilling that threatens to end the nation’s shale-oil boom. Prices have collapsed as OPEC follows Saudi Arabia’s strategy of defending its share of the global market against shale and other competitors. WTI traded near $45 a barrel on Monday.

Smaller Increase

Supplies from non-OPEC nations such as the U.S., Canada, Russia and Brazil will increase by 160,000 barrels a day to 57.6 million in 2016, according to the report. In last month’s report, OPEC had projected that non-OPEC supplies would expand by 270,000 next year.

The organization reduced 2016 estimates for U.S. supply by 103,000 barrels a day, projecting the country’s total oil output at 13.97 million.

Slowing U.S. output growth, combined with signs of strengthening demand, “could contribute to a reduction in the imbalance of oil-market fundamentals,” OPEC said. “However, it remains to seen to what extent this can be achieved in the months to come.”

As a result of the weaker outlook for non-OPEC supply, the organization increased projections for the amount of crude it will need to pump next year by about 200,000 barrels a day to 30.3 million. That’s still about 1.2 million less than the 31.54 million daily barrels its members produced in August.

Output from OPEC’s 12 members increased by 13,200 barrels a day in August, according to data the group compiles from media and other institutions. In separate data submitted directly by member nations, Saudi Arabia, the group’s biggest producer, reported that it cut production by 96,500 barrels a day to 10.265 million, the lowest level since February.

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