OPEC expects oil market to balance by end-2016

OPEC once again sharply lowered its forecast for oil production outside the cartel and now expects the market to rebalance by end of 2016. OPEC cartel in its monthly report said that production growth outside OPEC, led by US  weaken dramatically in third quarter and output will decline outside of the cartel for first time in fourth quarter.

• According to OPEC persistent lower oil price, coupled with highly leveraged balance sheet, costlier debt and cautious approach by equity investors will limit availability of cash for non-OPEC producers. This is likely to impact most shale producers in US.
• US production dropped from 13.8 million barrels/day in second quarter to 13.5 million barrels/day in third quarter and it is expected to decline to 13.4 million barrels/day in fourth.
• According to OPEC, production has taken hit also in Canada, Russia and North Sea.
• OPEC expects supply to be 57.2 million barrels/day this year.

While the organization is down beat on supply, it expects demand to improve.

• OPEC revised demand higher by 100,000 barrels/day to 92.9 million barrels/day this year, up from 91.4 million barrels/day in 2014. It expects demand to rise to 94.1 million barrels/day in 2016.

OPEC production was at 31.6 million barrels/day in September.

Brent is currently trading at $52.7/barrel.