The Organisation of Petroleum Exporting Countries (OPEC) Wednesday slightly raised its forecast for world oil consumption in 2017 and 2018 for a third-straight month, just as it said it pumped 32.75 million barrels of oil a day in the month of September, up about 88,500 barrels, according to independent sources cited in the group’s monthly report.
OPEC specifically forecasts the world’s appetite for oil will grow by 1.5 million bpd this year and 1.4 million bpd in 2018. The cartel raised both forecasts by 30,000 bpd. It cited higher-than-expected demand in China and developed nations this year and an improving economic outlook in 2018, particularly in Russia and China.
The improved demand outlook from both OPEC and the International Energy Agency last month underpinned the oil market rally in September.
Traders would be watching the monthly report from the International Energy Agency, due on Thursday, for confirmation of the demand trend.
Heading into the winter, OPEC sees strong demand for distillates — refined petroleum products like heating oil — due to forecasts for a colder winter compared with last year.
Stockpiles of distillates are below the five-year average, OPEC reports, and U.S. refinery disruptions caused by Hurricane Harvey only quickened the already-steady decline in inventories.
However, OPEC lowered its forecast for output growth from producers outside OPEC by 100,000 bpd in 2017 and 60,000 bpd in 2018.
Crude stockpiles in the OECD, a group of mostly developed nations, stood at just under 3 billion barrels in August, according to OPEC. That is about 171 million barrels above the five-year average, the level OPEC is trying to hit.
OPEC’s 14-member production levels for September is actually the second highest monthly level this year, returning to growth after the oil cartel’s output fell for the first time in five months in August.
OPEC is partnering with other major oil exporters, including Russia, to keep about 1.8 million barrels per day of supply off the market through March. The goal is to shrink global crude stockpiles and drain a glut that has weighed on prices for the last three years.
Nigeria and Libya, both exempt from the production cuts, led the gains with monthly increases of about 50,000 bpd each.
Nigeria’s production held above 1.8 million bpd for a second month. Africa’s biggest producer has said it will consider production limits once its output stabilizes above that level. OPEC gave Nigeria and Libya a waiver because internal conflicts caused big production declines in both countries last year.
Iraq, OPEC’s second-largest producer, posted the third-biggest increase. Its output grew by nearly 32,000 bpd to just under 4.5 million in September. Iraq has yet to drive down output to levels it agreed to last winter.
Saudi Arabia reported a slight supply increase, though independent figures showed a small decline and the Saudis were still pumping well below their quota. OPEC’s biggest producer has provided the lion’s share of cuts since the cartel implemented the caps in January.