Confident oil will rise, OPEC claims to be winning the price war
The initial oversupply came mostly from a boom in US shale production, which was turning Americans from OPEC's biggest customer into a competitor (image: on file).
OPEC had stated in its Monthly Market Report, published recently that: "Higher global refinery runs, driven by increased seasonal, summer, demand, along with the improvement in refinery margins, are likely to increase demand for crude oil over the coming months,"
OPEC also forecasted demand at an average of 29.27 million barrels per day in the first quarter 2015, a rise of 80,000 bpd from its previous prediction made in its March report.
The cartel said its own total output will increase by only 680,000 barrels per day, less than the previous expectation of 850,000 barrels per day, due to lower US and other non-OPEC production.
The report also noted that the United States appears to have been OPEC's chief target when, at its November meeting in Vienna, its members, under Saudi leadership, agreed to maintain production at 30 million barrels per day despite falling prices caused by an oversupply of oil.
It noted that average global oil prices began plunging in late June 2014 from more than $110 per barrel to a low of around $50 in January, but have now settled to around $60.
The report also quoted the CEO of Black Rock, the world's largest asset manager, Laurence Fink, as saying that the price of a barrel of oil probably would go no lower than $60 this year, but also rise no higher than $80.
The initial oversupply came mostly from a boom in US shale production, which was turning Americans from OPEC's biggest customer into a competitor. But shale oil extraction requires hydraulic fracturing, or fracking, which is more expensive than conventional drilling and isn't profitable if the price of oil falls below a threshold of about $60 per barrel.
The OPEC report also said that the US producers are beginning to feel that price pinch, quoting data gathered by Baker Hughes, the large US oilfield services company, that the oil rig count in the United States fell by 238 in March, leaving a total of only 1,110 rigs operating in the country as of March 15.
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