OPEC, the organisation for oil producing nations, pumped out less oil in December, but that doesn’t mean that prices are going to start to rise again anytime soon.
OPEC dropped its monthly report on the state of the oil industry on Monday morning, which showed that the world’s oil exporters produced 32.2 million barrels per day in December, down around 200,000 barrels from November.
Despite this minor fall, OPEC doesn’t expect that it will have any positive affect in production, with the report noting that in December: “Persistent oversupply in the oil market coupled with increasing signs of slowdown in the Chinese economy to exert pressure on the oil market.”
December’s drop in production was led by Nigeria, Saudi Arabia, Iraq, and Kuwait, all of whom reduced their oil production during December. Nigeria slowed production the most over the month, losing 77,000 barrels per day, down to 1.8 million per day.
Even though several OPEC nations slowed their production during December, the report shows that the oil market is still oversupplied by around 2.5 million barrels per day. OPEC says that demand for crude oil from OPEC nations stood at 29.9 million barrels per day over the course of 2015, with production averaging out at around 31.85 million.
Demand is expected to grow by 1.26 million barrels per day in 2016, with the world needing a total of 94.17 million barrels every day, up from 92.92 million over 2015. OPEC also forecasts that demand for its oil will grow by 1.7 million barrels this year to 31.6 million barrels a day.
While production from OPEC declined in December, the oil market is expecting another big chunk of oil some time soon, as Iran returns to the fold following the lifting of international sanctions over the weekend. Estimates have suggested that Iran could pump as much 500,000 barrels per day extra, putting even more downward pressure on the oil price.
Senior Iranian officials have denied this: “We will be more subtle in our approach and may gradually increase output,” Mohsen Qamsari, director general for international affairs of the National Iranian Oil Company said last week.
The report also officially announced Indonesia’s return to OPEC, something which occured in early December. The south east Asian nation, which is a net importer of oil, was an OPEC member for around 45 years, before suspending its OPEC membership in 2008, but returned to the organisation in December.
The price of oil has crashed in the last 18 months, falling from a peak of around $115 per barrel in June 2014, to less than $28 on Monday morning, hitting 13-year lows in the past week.