OPEC, US Energy Dept. See Enough Oil In The World

The Organization of Petroleum Exporting Countries (OPEC) said the world oil market was well supplied despite a plunge in Libya’s output, and forecast a further drop in its oil market share in 2014.

In a monthly report, OPEC said oil stocks in developed countries equaled almost two months of future demand although “some supply outages” had put upward pressure on prices.

The U.S. Energy Department expressed similar sentiments after it raised its 2013 estimates of non-OPEC supply while leaving global demand nearly unchanged.

The virtual shutdown of Libyan oil output for the second time in two years and the prospect of U.S. military action against Syria had pushed Brent crude to a six-month high above $117 a barrel in late August.

But Brent prices fell below $111 a barrel on Tuesday as the threat of a strike on Syria faded. U.S. crude futures also fell, from a peak above $112 a barrel in late August to settle at just above $107 a barrel on Tuesday.

“OECD inventories stand at a comfortable level of 58.5 days,” OPEC’s report read in part. “This figure is above the historical norm and provides confirmation that the market at present remains well supplied.”

The comment is OPEC’s first collective word on the oil market impact of the Libyan unrest, which has taken global supply outages to more than 3 million barrels per day (bpd) – some 3.5 percent of global demand.

The International Energy Agency, which during the 2011 Libya civil war ordered a rare release of oil from strategic reserves it controls, agrees with OPEC. It said on Aug. 29 that the market was “adequately supplied.”

In its own monthly report, the U.S. Energy Information Administration (EIA) said Non-OPEC member states will bring some 54.3 million bpd of oil to market this year, a 0.6 percent increase from the estimates it released a month earlier.

Meanwhile, the report forecast global oil demand will stand at 90.06 million bpd this year, a mere 0.1 percent increase from last month’s forecast.

EIA noted, however, that unplanned production outages from OPEC member states had reached 2.1 million bpd in August, the highest level recorded since the administration began tracking these numbers in January 2009. Total outages, including offline non-OPEC production, reached 2.7 million bpd last month, EIA said.

The U.S. government had reached out to energy experts in late August to discuss oil market conditions although it did not appear ready to tap into its strategic reserves, according to Reuters sources.

Market Share Fall

OPEC, which pumps a third of the world’s oil, in the report forecast a further erosion of its share of the world market in 2014 due to rising supplies from outside the 12-member group.

It left estimated growth in world demand next year at 1.04 million bpd, while increasing the non-OPEC supply forecast to 1.22 million bpd. New production from places like the U.S. shale fields is rebalancing the global oil market.

Meanwhile, demand for OPEC crude in 2014 will average 29.61 million bpd, down 320,000 bpd from 2013, the OPEC report forecast. Last month’s report estimated a 260,000 bpd year-on-year decline in the demand for OPEC oil.

This outlook shows challenges in store for OPEC member states as they attempt to sustain current production levels without risking a price drop below $100 a barrel.

OPEC is still pumping more crude than is in demand, despite outages in Libya. In August, extra oil from Saudi Arabia helped offset losses and supply from member states fell only by 124,000 bpd to 30.23 million bpd, according to secondary sources cited by the report.

EIA revised its 2014 OPEC supply estimates 0.4 percent lower than last month’s forecasts. OPEC supplies will amount to 35.62 million bpd next year, according to the latest U.S. estimates. Output from the United States will average some 7.5 million bpd this year and 8.4 million bpd in 2014, according to the EIA.

The OPEC and EIA reports are the first two of this month’s trio of oil supply and demand forecasts. The IEA updates its outlook on Thursday.

RIGZONE