OPEC Banks On Oil Demand Boost From Stronger Economic Growth

11 Aug 2017 Issue: 60 / 32

Waning compliance with the Opec/non-Opec “declaration of cooperation” to curb crude output is severely hampering efforts to rebalance the crude market. Allied with strong production gains elsewhere, this poor compliance has helped keep global stock levels high, putting a lid on prices in 2017.

A Saudi-led committee held meetings this week with production laggards in a bid to boost compliance. But the latest efforts look to be falling on deaf ears and the group’s August production is unlikely to fall much closer to its target. Opec will be looking for stronger than expected economic growth to boost global demand and for those sunken prices to curb output gains, particularly in North America.

Low oil prices may help hasten market rebalancing by curbing production growth, but they won’t alleviate oil producers’ revenue pain. Opec members’ oil export revenues are on track to come in at around $545mn in 2017 (MEES, 21 July). While this is $100mn more than in 2015 it is barely half the amount from 2013 and producers continue to rack up hefty budget deficits. (CONTINUED - 942 WORDS)