LONDON (Reuters) - OPEC raised its forecast for oil supply from non-member countries in 2018 as higher prices encourage U.S. shale drillers to pump more, offsetting an OPEC-led deal to clear a supply glut and a collapse in Venezuelan production.
In a monthly report on Wednesday, the Organization of the Petroleum Exporting Countries said non-OPEC producers would boost supply by 1.66 million barrels per day (bpd) this year. That was the fourth consecutive rise from 870,000 bpd forecast in November.
“For 2018, higher growth is expected on the back of the projected increase in U.S. shale production following a better price environment not only for shale producers, but also for other countries such as Canada, the UK, Brazil and China,” OPEC said of the outlook for non-OPEC supply.
This would lead to “a higher quarterly distribution throughout the year with a record-high level projected for the fourth quarter,” OPEC said.
OPEC, Russia and several other non-OPEC producers, but not the United States, began to cut supply in January 2017 to get rid of a global glut of crude that had built up since 2014. They have extended the pact until the end of 2018.
The deal has helped boost oil prices LCOc1, which topped $71 a barrel this year for the first times since 2014 and were trading near $65 on Wednesday. But it has also encouraged a flood of shale, fuelling a debate about the effectiveness of keeping the curbs in place.
The oil minister for Iran said OPEC could agree at its next meeting in June to start easing the curbs in 2019, the Wall Street Journal reported. He also said OPEC should aim for oil around $60 to contain shale growth.
Top exporter Saudi Arabia, however, said in February it was premature to discuss an exit strategy.
OPEC’s forecast of higher non-OPEC supply was balanced by figures in the report showing OPEC’s compliance with the supply cuts remained high in February and a further sharp slide in Venezuelan oil output.
The supply cut’s original aim was to get rid of a supply glut by reducing the level of oil inventories in developed economies to that of the five-year average. The latest figures gave a mixed picture on stock movements.
Inventories rose by 13.7 million barrels in January to 2.865 billion barrels, although this was only 50 million above the five-year average, the closest yet OPEC has come to the original target.
While rivals are pumping more, OPEC’s production in February fell, according to the report.
Total output fell by 77,000 bpd to 32.186 million bpd, led by drops in Iraq, the United Arab Emirates and Venezuela, according to figures OPEC collects from secondary sources.
Adherence by the 12 OPEC members with output targets rose to 147 percent, according to a Reuters calculation based on the OPEC figures, higher than 137 percent in January based on last month’s report.
The figures that OPEC members reported themselves showed some deeper declines in production.
Venezuela, whose output is dropping amid an economic crisis, told OPEC its production sank by about 183,000 bpd to 1.586 million bpd in February, believed to be the lowest in decades.
Editing by Jason Neely/David Evans
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