The Organisation of Petroleum Exporting Countries (OPEC) lowered its projection for oil demand in 2015 to 28.9 million a day — its lowest level since 2002, according to Bloomberg.
The cut of around 300,000 barrels a day in expected demand comes after crude oil prices have collapsed by 40% since June.
“The downward revision reflects the upward adjustment of non-OPEC supply as well as the downward revision in global demand,” OPEC said in its monthly market report.
The combination of slowing growth, particularly in energy-intensive countries like China, and the shale oil boom in the US has put significant pressure on oil prices over recent months. Brent crude has fallen from a peak of $US115 a barrel in June to under $US66 today, while US benchmark WTI crude is down from over $US107 a barrel to $US62.7.
Last month OPEC decided against cutting production despite the price falls. In the statement following its decision the cartel said “although world oil demand is forecast to increase during the year 2015, this will, yet again, be offset by the projected increase of 1.36 mb/d in non-OPEC supply”.
What did they mean by that?
Well in recent years non-OPEC supply has been increasing meaning that OPEC’s hold over global oil markets has been weakened. This means that the cartel, which controls around 40% of global oil production, is now having to compete much more actively on price with non-OPEC producers in order to maintain market share.
As a demonstration of this trend output from within OPEC actually fell by 390,000 barrels a day in November due to supply disruption in Libya, after rebels seized the country’s critical Sharara oil field. However, those falls were more than compensated for by increases in non-OPEC supply which has risen by 1.72 million barrels a day in 2014, around 580,000 a day more than OPEC’s initial estimates according to Bloomberg.
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