Opec optimistic even as its output surges

OREANDA-NEWS. April 20, 2015. Opec said global product demand has improved steadily since the beginning of 2015 and demand for crude is likely to rise in coming months. It also spotted a fall-off in non-Opec supply growth this year. But its Monthly Oil Market Report (MOMR) also said members' data showed Opec production to have soared by 1.2mn b/d in March, compared with February, to levels unseen since 2013.

The forecast for global oil demand growth for 2015 was left unchanged at 1.17mn b/d, putting demand at 92.45mn b/d. Non-Opec supply growth for last year was pushed up by 130,000 b/d from the last forecast to 56.49mn b/d but despite this the growth forecast for 2015 was cut by 160,000 b/d to 57.17mn b/d. It based the forecast on low prices, lower numbers of active rigs in the US, and lower company capital expenditure.

The MOMR lifted its forecast call on Opec crude for 2015 by 100,000 b/d to 29.3mn b/d but cut its 2014 estimate by the same volume to 29mn b/d. The first-quarter 2015 call is seen at 27.78mn b/d, rising to 30.71mn b/d by the fourth quarter.

Opec's standing production ceiling remains 30mn b/d but data for March from its own members puts output at 31.49mn b/d, a rise of more than 1.21mn b/d from February. Argus estimates March production at 31.27mn b/d.

The member data show a 659,000 b/d rise in Saudi output to 10.29mn b/d, confirming remarks made by the Saudi oil minister recently. Iraq's declared output increased by 556,000 b/d to 3.34mn b/d, more than making up for a weather-related drop in February. Libyan production, which is volatile because of the security situation in the country, rose by 184,000 b/d to 525,000 b/d. Nigeria, the UAE, and Angola all reported falls while Iran said its output was stable at just over 3mn b/d.

The rise in production points up the issues facing Opec ministers when they meet in Vienna in early June. In November, members agreed to hold their production ceiling at 30mn b/d, a policy strongly pushed by Saudi Arabia and designed to protect market share. But some members are unhappy with this policy. This week Iran called for a 5pc cut to the ceiling. Venezuela and Algeria are among other internal dissenters.

Yesterday, the IEA's monthly report also noted pockets of oil demand strength and a slightly weaker outlook for North American shale. It raised its 2015 demand growth forecast by slightly to 1.08mn b/d and trimmed non-Opec output growth by 110,000 b/d to 630,000 b/d, leaving its full-year forecast for the call on Opec crude at 29.5mn b/d.