Sustained low oil prices have seen the Organization of Petroleum Exporting Countries maintain their forecasts for global demand in 2016 as consumer nations increase their purchases.
In its November monthly market report, the cartel held its prediction that world oil demand will rise by 1.5m barrels/day in 2015 to 92.86 mb/d.
It then expects global demand in 2016 to grow by 1.25 mb/d, to 94.14 mb/d.
But the current low price environment, combined with excess global inventory, has led to drops in supply both inside and outside OPEC.
The report said nearly 5 mb/d worth of non-OPEC projects have been deferred or cancelled due to current price conditions, with capex reductions at producing fields also occurring.
At 210m barrels the overhang of commercial oil inventories in the OECD versus their five-year average was the joint-highest in the last ten years, the report said. The last time that occured was in 2008, following the global financial crisis.
The cartel expected non-OPEC oil supply to contract by 0.13m barrels per day to 57.11 mb/d in 2016.
OPEC production has also declined, by 256,000 b/d to average 31.38 mb/d in Octover, according to secondary sources unnamed by the report.
The “forward cover” measure, which OPEC uses to state the volume of stock held by OECD economies, stood at 63.0 days in September, the cartel said.
That was a contraction of 0.3 days since August, but is still 4.5 days above the five year average.
OPEC said refinery margins also fell globally in October, despite it being the peak maintenance season with 8 mb/d of capacity offline, due to these high inventories as well as market expectations of a relatively mild winter.
The November report was the last to be published ahead of the cartel’s meeting in Vienna on 4 December, where its position on production going forward will be decided.
At present, it maintains high production despite the global oversupply, which has led to the OPEC basket price dropping from $85.06 in October 2014 to $45.02 last month.
The group is still banking on a recovery in prices next year, however, citing strategic oil reserves in countries such as China and India taking advantage of the current price climate.
“In addition, a colder- or longer-than-expected winter, as well as better-than-projected economic activities, could support incremental demand. This would help alleviate the current overhang and support a recovery of crude oil prices in the coming months”, the report said.
The data came after Wednesday’s tumble in oil markets, with WTI closing below $43 for the first time since 24 August.
Deutsche Bank pointed to the almost-daily negative headlines suggesting the current glut in prices is set to be prolonged.
Oil inventory surplus is now the largest it has been in at least a decade, with the American Petroleum Institute announcing Wednesday that inventories increased by 6.3m barrels last week – far higher than analyst predictions of 1.1m barrels.