Saudis pump record crude as OPEC sees stronger demand in 2016

GRANT SMITH

LONDON (Bloomberg) -- Saudi Arabia told OPEC it raised oil production to a record as the organization forecast stronger demand for its members’ crude in 2016.

The world’s biggest oil exporter pumped 10.564 MMbopd in June, exceeding a previous record set in 1980, according to data the kingdom submitted to OPEC. The group expects demand for its crude to rise in 2016 compared with this year as supply elsewhere falters and consumption growth quickens.

OPEC said it expects global oil markets to rebalance as diminished output from rival producers such as U.S. shale drillers whittles away a glut. The strategy is taking time to have an impact, with crude prices remaining 46% below year-ago levels and annual U.S. production forecast to reach a 45-year high.

“An improvement towards a more balanced market” is likely in 2016 as consumption grows faster than supply, OPEC’s Vienna- based research department said Monday in its monthly market report. “Momentum in the global economy, especially in the emerging markets, would contribute further to oil demand growth in the coming year.”

Brent crude futures fell 1.8% to $57.70/bbl at 10:51 a.m. local time on the London-based ICE Futures Europe exchange, extending a 2.6% loss last week.

Three-Year Peak

Demand for OPEC’s crude will climb next year by 900,000 bpd to average 30.1 MMbopd, according to the report. That’s still about 1.2 million less than the group estimated it pumped in June. Global markets remain “massively oversupplied,” the International Energy Agency said on July 13.

OPEC’s 12 members raised production by 283,200 bpd to a three-year high of 31.378 MMbopd last month, according to external estimates of output cited by the report. This data included a lower estimate for Saudi production of 10.235 MMbopd.

There was no total available for data submitted directly by OPEC members, because of omissions by Algeria, Libya and Venezuela.

Global oil demand will accelerate next year, to 1.34 MMbopd, compared with 1.28 million in 2015, led by rising consumption in emerging economies, according to the report. Supply growth outside OPEC will slow to 300,000 bpd in 2016 from 860,000 bpd this year with the gain concentrated in the U.S.

The IEA estimated demand would grow more slowly next year, with consumption expanding by 1.2 MMbopd compared with 1.4 million in 2015, according to its monthly report July 10. The Paris-based adviser forecast no growth in non-OPEC supply next year.

World oil demand will average 93.9 MMbopd in 2016, while non-OPEC supply will total 57.7 MMbopd, according to the OPEC report.