In the July release of its Oil Market Report, the Organization of Petroleum Exporting Countries (OPEC) for the first time estimates that demand for the cartel’s crude will decline in 2014. Demand in 2013 is currently forecast to average 29.9 million barrels a day, and to drop by 300,000 barrels a day in 2014. The cartel produced 30.38 million barrels a day in June according to non-OPEC sources.
Compounding the problem, the price of OPEC’s reference basket of crudes has fallen from a six-month average of around $105 a barrel to around $101 in June.
Supply growth in 2013 continues to be forecast at around 800,000 barrels a day, rising to 1 million barrels a day in 2014. That rise in demand is expected to be met by non-OPEC sources like the U.S., Russia, and China. In its Short-Term Energy Outlook published yesterday, the U.S. Energy Information Administration (EIA) estimated that U.S. crude production would rise from an average of 7.3 million barrels a day this year to 8.1 million barrels a day next year.
Lower prices and falling demand pose a significant problem for OPEC members, all of which depend on crude sales for a majority of their national incomes.
The International Energy Administration is scheduled to issue its monthly oil market review tomorrow.