Opec is predicting lower demand for oil in 2016, resulting in an increase in excess supply in the market

 
Billy Bambrough
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Chinese Laborers Work At An Oil Well In Hejian
Opec has admitted high levels of shale production despite the low oil price means its predictions are more uncertain (Source: Getty)

Global demand for oil is expected to be less than previously thought in 2016, according to the Organization of the Petroleum Exporting Countries (Opec).

Opec has put demand for crude at an average of 31.52m barrels per day in 2016, down 90,000 from last month's forecast.

In its latest month report Opec has also predicted that supply from non-Opec rivals, including Russia and the US, will continue to more resilient to lower prices than was expected.

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Lower demand and stronger non-Opec production means the excess supply on the market this year is set to increase.

Supply is now expected to exceed demand by about 760,000 barrels per day in 2016 if producers continue at February rates, up by 40,000 from the previous report.

The oil price has fallen from highs of over $110 per barrel in the summer of 2014 after Opec gave up trying to control the price through limited production after the rise of shale drilling eroded its market share.

The Opec report is at odds with the latest data from the International Energy Agency, which said late last week that US and Russian producers were cutting production by more than it had expected sending prices higher after still after weeks of surging prices.

Opec is still expecting 700,000 barrels per day this year, though admitted non-Opec producer efforts to maintain output in the face of low oil prices has made its 2016 forecast more uncertain.

The group pumped 32.28m bpd in February, a slight decline on January.

Over the last month a 175,000 fall in barrels produced per day was put to down to outages in Iraq and Nigeria.

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De facto Opec leader Saudi Arabia reported it kept production level in February at 10.22m barrels per day, seemingly following the terms of the yet to be finalised deal with Venezuela and Qatar and Russia to freeze production at January levels.

Opec rebel and Saudi Arabia rival Iran reported it pumped around 3.39m barrels per day, about 250,000 more than the secondary sources' estimate.

Iran has vowed to regain market share it lost as a result of the trade embargo on the country and will not partake in talks with fellow producers until it hits four million barrels per day.

Russia signalled earlier today it is getting close to a deal with Opec, despite Iran's absence.

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