OPEC crude oil demand is capped

Crude oil production by OPEC seems peaking out in June. Since global balance of petroleum supply and demand are still oversupply, OPEC member countries are hesitant to make up for supply disruption from part of members.

Crude oil production by OPEC 12 member nations fell 80,000 barrels per day on month in June to 30.38 million bpd, according to survey by Reuters. Decrease mainly came from Nigeria, Libya and Angola. US Energy Information Administration also estimated that OPEC June crude oil output fell 300,000 bpd from a month ago to 30.1 million bpd.

OPEC's crude oil production had decreased until the first quarter this year after peaked in the second quarter 2012. Outputs had rebounded during April and May, but fell again despite demand season in the northern hemisphere has not finished.

OPEC members started to hike their production in 2011 in order to make up for sudden supply disruption from Libya due to civil war. But Libyan supply had resumed in late 2011 and added supply sharply.

Oil shipments by OPEC members excluding Angola and Ecuador reported by Oil Movements show that the organization members' shipments were not so large in the Q2 2012 despite the high production rates. Volume of oil shipments in late 2012 was even higher than Q2 despite production fell by more than 1 million bpd from the peak.

The above chart also suggests that demand for OPEC oil has been capped because of increasing oil supply from non-OPEC producers.

Estimated quarterly call on OPEC crude oil calculated by supply and demand forecasts by some institutes are as follows. All the numbers for Q2 2013 were below actual estimated production. It means OPEC crude oil has been oversupplied in the past couple of months.

Regarding call on crude oil after July, forecast by International Energy Agency continues to be under the production quota of 30 million bpd. Meanwhile, forecasts by EIA and OPEC are close to current estimated production level. Since non-OPEC producers are expected to increase output steadily, call on OPEC crude oil is not seen to be higher even in Q4 in spite of winter demand season.

OPEC members are hesitant to increase oil production due to fears of weak demand. Therefore, decrease of supply by force majeure in Nigeria and so on is not supplemented by other members. OPEC crude oil output is likely to remain at slightly above the production quota of 30 million bpd in the near term.

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