According to the regular monthly oil report released by the Organization of the Petroleum Exporting Countries (OPEC) on Wednesday, the expectation is that crude demand will remain flat, maintaining current levels.
Despite no reduction in demand, the dynamics of world oil production give OPEC analysts reason to believe that the market oversupply of oil will be reduced during the remainder of 2015.
The report further indicates that OPEC is of the opinion that earlier forecasts of a growth in demand of 1.18 million barrels per day will be maintained. The expectation is that the demand for oil from OPEC members for 2015 will be 29.3 million barrels daily, 300,000 higher than the 2014 figure.
The report is bullish on the demand for crude in the United States as a result of lower fuel prices and increases in the demand for sports utility type vehicles that are heavy gasoline users. Following the record production levels in May, the U.S. Energy Information Administration (EIA) data indicated a decline of 6.8 million barrels in crude supplies for the week ended June 5. This is in line with forecasts of lower production for the balance of 2015.
Platts, the provider of benchmark energy price and stock assessments, forecast a crude-stock reduction of 1.6 million barrels in the U.S. while the EIA reported a drop of 6.8 million barrels in supply on Tuesday.
News of the expectation of demand levels being maintained together with the drop in U.S. supplies saw oil futures rally with prices for July up by around 2%.
OPEC, which produces around 35% of the world oil production, also reported an increase in total production by member producers of 24,000 barrels per day in May, as a result of higher production output by Iraq and Libya. The inclusion of the ISIS factor in both Libya and Iraq has resulted in uncertainty on exact figures while the organization produces and sells crude very much on an ad hoc basis in order to derive much needed funding from the areas under its control.
Following on the EIA report on Tuesday, OPEC forecasts a decline in United States oil production for the remainder of 2015. While OPEC intends maintaining its own supply levels despite the world crude oversupply which appears to be around 2 million barrels daily, the organization believes the oversupply rate will ease during the balance of 2015 and into 2016.
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