The Secretary-General of OPEC, Abdullah al-Badri, said oil supply growth from non-OPEC producers might be zero or negative in 2016 because of lower upstream investment.
“There is one problem we are facing: the overhang”, he said.
The move came as Iran, Iraq and other countries in the Middle East made deeper cuts in their official prices than Saudi Arabia last month, exacerbating the concerns that production will continue to outpace demand and further depress oil prices, which have shed about half of their value since last summer.
Even though the oil price has halved since past year on oversupply, Russia, the world’s top oil producer, has refused to cooperate with Opec, where Saudi Arabia is the leading producer. Cuts in investment in oil projects this year are the biggest in the history of the industry, and spending on exploration and production projects is down by at least 20 percent this year, he said.
“I see the first mixed signs for recovery of oil prices”, van Beurden said at the two-day gathering that concludes Wednesday. “Less supply means high prices”, Abdalla Salem el-Badri said at the conference.
Oil prices jumped more than $2 a barrel on Tuesday, breaking out of a month-long trading range on technical buying and industry talk as well as USA government data suggesting the global supply glut could be ebbing. With more job cuts coming in the energy sector, oil should benefit from lower US output as well as a more accommodative interest rate environment as the Fed has one hand tied behind its back.
“World oil demand is expected to grow 1.7 million bpd in 2015″.
He noted that non-OPEC supply growth was slowing and was expected to be “zero” next year, while the call on OPEC crude was rising. It advanced $1.12 to $49.25 a barrel on Monday. The contract gained 1.6 percent in the previous session.
John Kilduff of Again Capital said that the US Department of Energy’s latest short-term energy outlook report on Tuesday appeared to spark the rally.
“Crude prices are supported by a tentative uptick in risk appetite and expectations of lower United States production”, Bernard Aw, market strategist at IG Markets in Singapore, told Agence France-Presse.
“The fall in the number of oil rigs in the USA will accelerate the decrease in crude production we’ve been seeing recently”, Hong Sung Ki, a Seoul-based commodities analyst at Samsung Futures Inc., said by phone.