New production capacity from OPEC producers will help oil stocks build in coming months and be enough to cope with an expected late-year demand surge, the group said on Friday.
OPEC capacity will grow by 1.6 million barrels per day to 32.7 million this year as big new facilities start in Kuwait, Nigeria and the UAE, and smaller expansions emerge in Algeria, Iran and Venezuela, OPEC said in its monthly Oil Market Report.
Increased OPEC supply will help make up for lower-than expected production from countries outside the cartel, the report said.
OPEC has already raised production by 300,000 bpd to 29.76 million bpd in March, with more than half the monthly increase coming from top world exporter Saudi Arabia, which lifted supply by 155,000 bpd to 9.35 million, the report said.
Current production levels imply that global stocks will rise by two million barrels daily in the current quarter and a further one million bpd in the third quarter, according to the report from OPEC’s Vienna headquarters.
“Global oil stocks are expected to continue to build in the coming months,” said the report.
“Even with the high expected demand for OPEC crude, spare capacity should be more than adequate to accommodate the projected requirement.”
Higher OPEC supply, and rising inventory in the United States, has helped pull world oil prices from record highs above $58 a barrel. U.S. crude (CLc1) was down 60 cents at $50.53 a barrel on Friday.
By contrast OPEC revised down its estimate of non-OPEC supply growth this year by 70,000 bpd to 990,000 bpd, with the main shortfalls coming in the second half of the year.
“The major revisions come from lower-than-expected growth in Russia, Kazakhstan, and the UK,” it said.
The lower non-OPEC supply forecast helped push up OPEC’s estimate of the likely demand for its crude oil this year by 100,000 bpd to 29.1 million bpd -- including an increase to 30.4 million bpd in the fourth quarter.
Even so, new facilities coming onstream will increase OPEC’s cushion of spare capacity to cope with unexpected supply problems, the report said. A lack of spare capacity has helped feed oil’s price strength over the last year.
“Spare capacity is currently estimated to average 8.8 percent in the first quarter, rising to 9.1 percent and 10.9 percent in the second and the third quarter respectively, given OPEC production at the current March level,” the report said.
“OPEC spare capacity in the fourth quarter is expected to average 9.5 percent based on the projected demand for OPEC crude, or twice the level seen in the same period last year,” it added.
OPEC left its forecast of world oil demand growth this year virtually unchanged at 1.89 million bpd, or 2.3 percent -- up just 30,000 bpd from a previous forecast.
It estimates that Chinese demand will grow at 600,000 bpd, or 9.2 percent.
OPEC ministers meet on June 15 in Vienna. The group’s March meeting in Iran agreed to raise formal quota by 500,000 bpd with an option of a further 500,000 bpd increase if prices had kept rising.
