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How Tight Is Global Crude Oil Supply?

Richard Zeits profile picture
Richard Zeits


  • OPEC's latest report suggests that the market for crude will be undersupplied by ~0.4 million barrels per day in 2018.
  • However, the forecast appears based on the assumption of anemic production growth in the U.S.
  • OPEC's forecast appears to be in strong disagreement with the EIA's forecast.

In its latest monthly assessment of the global petroleum market, OPEC's think tank reduced its "call on OPEC" estimate in 2018 by 0.2 million barrels a day ("MMb/d") from the month-earlier report. Still, the new estimate of 32.6 MMb/d exceeds the cartel's current production by a wide margin, approximately 0.4 MMb/d.

In the context of the Cooperation Agreement that has been extended through year-end, the forecast implies that the global petroleum market will be tight in 2018 and global inventories are likely to decline. The report appears to support the thesis for stronger oil prices throughout 2018.

However, similar to previous reports, the prediction is based on certain debatable premises. The forecast continues to reflect an overly pessimistic, in OIL ANALYTICS' assessment, view of U.S. oil production growth in 2018. OPEC's estimate for U.S. crude oil production falls far behind the most recent forecast by the EIA.

The "shale skepticism" persistently reflected in OPEC's forecast puts its key predictions in question and raises concerns regarding a potential bias.

OPEC Forecast: Global Supply And Demand

In its latest forecast, OPEC estimates world oil demand to increase by 1.6 MMb/d in 2018, little change from one month ago. The estimate puts 2018 global demand growth at par with demand growth in 2017, which is now estimated at 1.6 MMb/d. Total oil demand is expected to be 98.6 MMb/d in 2018.

On the supply side, non-OPEC supply forecast for 2018 was revised up by 0.28 MMb/d, "mainly due to higher-than-expected output in 1Q18 by 0.36 MMb/d in OECD (Americas and Europe), FSU and China." This upward supply revision follows an upward revision of 0.32 MMb/d a month ago when OPEC increased its expectations for production in the US, UK and Brazil, as well as reduced its decline estimates for Mexico and China. The new forecast calls for non-OPEC supply growth of

This article was written by

Richard Zeits profile picture
Richard Zeits is an Oil & Gas industry analyst and consultant. His background includes fourteen years as Energy industry-focused investment banker, portfolio manager and senior investment analyst with bulge bracket firms in New York. Zeits Energy Analytics use elaborate proprietary analytics and data bases to provide in-depth industry research, market intelligence, and forecasting.

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