Will Oil Prices Sink Back To $30? OPEC Adds To Bearish Sentiment

OPEC yesterday said its oil output fell last month and forecast supply from rival producers next year would decline for the first time since 2007 as low prices prompt investment cuts, reducing a global supply glut. "We see global oil demand maintaining its recent healthy growth", he said, adding, "We see less non-OPEC supply". That is the first decline since March, according to OPEC figures.

In October, OPEC's own production, according to secondary sources, dropped by 256,000 to average 31.38 mb/d - still above OPEC's official limit.

"The massive stockpile overhang is one more indicator, along with the ongoing slump in prices, that Saudi Arabia's oil strategy isn't working so far", said Seth Kleinman, head of energy strategy at Citigroup Inc.in London.

The report admitted low prices were providing "a challenging market environment for a few higher-cost crude oil production" - seemingly vindicating the cartel's strategy to crowd out rivals such as USA shale.

Inventories in OECD economies are now 210 million barrels above the five-year average, OPEC said, more than the 180 million barrels above that average they stood at in early 2009.

OPEC kept unchanged its 2015 and 2016 forecasts for global oil demand, production outside the group, and the amount OPEC will need to pump. The last time that occured was in 2008, following the global financial crisis.

"The decline is expected, despite the Jan-Sept oil production on Azerbaijan's oilfield block Azeri-Chirag-Gunashli increased by 4%, compared to the same period of 2014", the OPEC report says. Slowing non-OPEC supply and rising demand for winter fuels could "help alleviate the current overhang", enabling a recovery in prices, it said. OPEC's predictions for 2016 maintained demand would grow despite continuing low prices caused by overproduction throughout 2015.

Opec will meet for their latest annual meeting on December 4.

Brent futures fell 85 U.S. cents, or 2 per cent, to US$44.96 a barrel in morning trade.