OPEC countries are prepared to step in to alleviate any market shortages together with other producers, the group suggested on May 14, acknowledging recent geopolitical developments could hit oil supplies.
“Despite the large uncertainties prevailing in key market fundamentals, OPEC, as always, stands ready to support oil market stability, together with non-OPEC oil-producing nations,” OPEC said in its monthly oil market report.
The U.S.’s withdrawal from the Iran nuclear deal and the reimpostion of sanctions against its economy is expected to hit the OPEC country’s oil exports while Venezuelan supply is taking a hit after economic and political crises impact its energy industry.
The report follows comments by officials last week who said that OPEC kingpin Saudi Arabia will not act unilaterally to increase oil supplies if needed, and any rise in output had to be coordinated with Russia and other producers.
Production from OPEC countries rose by 12,000 barrels per day (bbl/d) last month to average 31.9 million bbl/d, according to estimates by secondary sources such as analysts and industry consultants. Yet the group estimates demand for its crude will stand at a higher level this year at 32.7 million bbl/d—another upward revision.
This will add to a growing chorus of industry voices questioning if OPEC and its partners will begin to unwind a global deal to restrain supply in the coming months. Oil prices have been on the rise with Brent crude, the international benchmark, holding around $77 a barrel on May 14.
Also helping spur oil prices higher has been robust global consumption of oil. OPEC increased its world demand forecasts for 2018. Growth in consumption was revised higher by 25,000 bbl/d to 1.65 million bbl/d, compared with last month’s report on stronger data from industrialized nations in the first quarter. Total demand is set to stand at nearly 98.85 million bbl/d this year, also higher than anticipated by 200,000 bbl/d.
Despite concerns about rising U.S. supply putting a ceiling on rising oil prices, it has yet failed to make a significant impact. Part of this is due to constraints on new U.S. production. Still, non-OPEC supply was revised higher slightly, by 10,000 bbl/d as higher predictions for output from the U.S., Argentina, Colombia and China were largely offset by downward revisions to Canada, Mexico, Norway, U.K. and Brazil. It is now estimated to grow by 1.7 million bbl/d year-over-year—almost 90% accounted for by the U.S.—to average 59.6 million bbl/d.
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