OPEC drops output to lowest level in almost two years
BY GRANT SMITH
VIENNA (Bloomberg) -- The Organization of Petroleum Exporting Countries (OPEC) predicted “sluggish” fuel demand and increasing supplies this winter as the group’s output dropped to the lowest in almost two years amid losses in Iraq.
Consumption in Asia will be constrained by the removal of subsidies in countries such as Indonesia and Malaysia, while demand in Europe will continue to ebb despite an economic recovery, OPEC said today in its monthly market report. Its 12 members pumped 30.05 million barrels a day last month, the least since October 2011. OPEC kept estimates for global oil demand in 2014, and the amount of crude it will need to provide, in line with last month’s forecast.
“Despite the more positive outlook for the U.S. and Europe, global product markets are expected to come under pressure over the winter season,” the group’s Vienna-based secretariat said. “The combination of sluggish demand and increasing product supplies are likely to damp margins, leading to lower refinery runs over this period.”
Brent futures have slipped about 1 percent this year, trading near $109 a barrel in London today. Slower growth in emerging economies as well as easing of tensions between Iran and the west over the OPEC member’s nuclear program also helped lower oil prices. Oil refiners will cut processing of crude by about 2 million barrels a day in the fourth quarter, from 77.2 million in the third, because of reduced profit margins and seasonal maintenance work, the group said.
OPEC’s production fell by about 390,000 barrels a day to 30.047 million in September as output from Iraq slumped by 370,300 barrels a day to 2.8 million amid maintenance at the Basrah terminal, data from secondary sources cited in the report show. Supplies from Libya, Saudi Arabia and Venezuela also declined, according to the data. The organization is responsible for 40 percent of global oil supplies.
The group forecast that world demand will increase by 1 million barrels a day, or 1.2 percent, to 90.8 million a day in 2014, unchanged from its prediction in last month’s report.
Supply from outside the organization will increase by 1.2 million barrels a day to 55.27 million next year, reducing the amount that OPEC will need to supply. The call on OPEC will average 29.6 million barrels a day in 2014, or about 400,000 a day less than it pumped in September.
The group’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. OPEC will meet on Dec. 4 in Vienna to discuss output policy.
The International Energy Agency will release its monthly report tomorrow.