Demand for oil from Nigeria, others to fall, says OPEC

Organisation of Petroleum Exporting Countries (OPEC), the oil producers’ cartel, expects demand for crude from its member countries including Nigeria to hit a five-year low next year as the US shale boom continues to eat into its share of the global market.

Nigerian government officials have shied away from facing the truth of the emerging seismic shift but in its first outlook for 2014, the Vienna-based OPEC forecast that though there will be the strongest oil demand growth on the back of improved prospects for global growth, however, the increase in demand would be more than offset by higher output from non-OPEC producers such as the US and Canada.

The result would be higher spare production capacity especially in countries like Nigeria and a rise in global stocks of crude. That could force down the price of oil – unless OPEC members cut production.

“This would imply a further build in global crude inventories, which currently stand at high levels,” the cartel’s analysts said in their regular monthly report.

The shale oil boom, which led to US production growing the most on record last year, is reducing demand for foreign oil from the world’s largest consumer.

US oil imports from OPEC members such as Nigeria and Angola have been cut sharply in recent years.

OPEC has been consistently more sceptical on the prospects for output growth from the US than other forecasters such as the International Energy Agency and the US Energy Information Administration.

In its monthly report on Wednesday, it said non-OPEC supply was expected to grow by a mere 1.1m b/d in 2014, slightly higher than the increase of 1m b/d it has forecast for this year.

The EIA is forecasting non-OPEC supply to grow more than 1.5m b/d in 2014.

The producers’ cartel expects demand for its crude to fall 0.3m barrels a day to 29.6m b/d in 2014.

That would be the lowest level of demand since 2009 when oil consumption fell sharply during the financial crisis, according to figures in the organisation’s annual report published last week.

OPEC members have a production target of 30m b/d but produced 30.4m b/d in June, according to secondary sources.

Ministers of the cartel chose to leave their output target unchanged at their biannual meeting in May, despite the expectation of increased supplies from the US.

Miswin Mahesh, an analyst at Barclays, said the cartel was unlikely to have to force production cuts because supply disruptions from members such as Nigeria and Libya had been keeping production in check.

“Assuming risks to key producers remain, there is room for OPEC to continue producing at current levels,” Mahesh said.

As well as reduced demand, OPEC members are facing lower prices for their crude oil.

The OPEC reference basket, which includes the crudes produced across its members, averaged $105.09 a barrel in the first six months of the year.

That was a decline of almost $7 from last year when OPEC members reaped record oil export earnings thanks to buoyant oil prices.