It is for the first time that the OPEC states recognize the growing oil supplies from its rivals. The oil supplies will exceed growth in demand this year. It´s because of thriving U. S. oil industry, mainly from shale continuing revolution.
This is from Bloomberg: “The Organization of Petroleum Exporting Countries raised its expectation for supply growth from the U.S. and other producers for a fourth consecutive month, according to its monthly market report. The outlook suggests efforts by the group and Russia to clear a global glut by cutting supply are backfiring, as new production emerges, particularly in the U.S.”
According to Bloomberg, oil rallied to a three-year high in January as the supply curbs by OPEC and Russia drain a surplus unleashed by a boom in U.S. shale oil. Prices have since retreated with the American shale industry continuing to flourish, propelling output to record levels. While global oil demand will climb by 1.6 million barrels a day this year, more than previously thought, that can be covered by an increase of 1.66 million barrels a day of supplies from outside OPEC, the organization said. It raised non-OPEC supply growth forecast by 260,000 barrels a day in the latest edition, and that from the U.S. by about 12 percent to 1.46 million a day.
This can result in to total failure of OPEC strategy to continuing oil cuts. Gulf States and Russia want to clear the surplus in inventory.
“As a result, OPEC’s ongoing cuts won’t be as effective in clearing the rest of the inventory surplus, the data showed. The cartel will be required to supply about 200,000 barrels a day less than anticipated in last month’s report. By changing its projections, OPEC is catching up with other forecasters like the International Energy Agency, the institution that advises oil-consuming nations. The IEA’s estimate of non-OPEC growth in 2018 is still higher, at about 1.8 million barrels a day,” writes Bloomberg.
The report also includes data indicating that OPEC cuts are shrinking the global oil glut. “Surplus oil inventories in developed nations have plunged by 85 percent from the start of last year.”