Opec has said its oil output fell in October and forecast supply from rival producers next year would decline for the first time since 2007 as low prices prompt investment cuts, reducing a global supply glut.
In a monthly report last week, the Organisation of the Petroleum Exporting Countries said it pumped 31.38mn bpd last month, down 256,000 bpd from September.
If realised, the forecast of a decline in supply outside Opec would be a further indication the group’s strategy is working. Opec last year abandoned a longstanding policy of propping up prices and instead raised output, seeking to recover market share taken by higher-cost rival production. Oil is trading at just under $46 a barrel, more than 50% below its price in June 2014.
“The recent decline in oil prices has encouraged additional oil demand,” Opec said in the report. “It has also provided a challenging market environment for some higher-cost crude oil production, which has already shown a slowdown.”
The group expects non-Opec supply next year to fall by about 130,000 bpd, following growth of 720,000 bpd this year, “as nearly $200bn of capex cutbacks this year and next create a gaping supply hole”.
Opec production, which has surged since the policy shift of November 2014 led by record Saudi Arabian and Iraqi output, fell in October on export delays in Iraq and lower supply from Saudi Arabia and Kuwait, said the report, citing secondary sources.
Opec’s report points to a 560,000-bpd supply surplus in the market next year if the group keeps pumping at October’s rate, down from 750,000 bpd indicated in last month’s report. In the third quarter of 2016, demand for Opec crude will rise to an average of 31.51mn bpd, Opec predicted.