OPEC on Tuesday was upbeat on the oil market outlook for 2017, saying global demand for its crude would be higher than its current production and excess oil inventories would be whittled down.
However, the Organization of the Petroleum Exporting Countries in a monthly report also cut its forecast for world economic growth this year, citing increased uncertainty following Britain's vote to leave the EU and said the pace of oil demand growth would slow slightly next year, in its first 2017 forecast.
"After the UK's referendum to leave the EU, economic uncertainty has increased," OPEC said in the report. "Potential negative effects have led to a downward revision of global economic growth in 2016 to 3.0 percent from 3.1 percent."
Other forecasters including the International Monetary Fund have cut economic growth outlooks following the UK referendum. Concern about the economic impact of Brexit has weighed on oil prices, which at $47 a barrel have fallen from a 2016 high close to $53 in early June.
World oil demand will rise by 1.15 million barrels per day (bpd) in 2017, OPEC said, its first forecast for next year in the monthly report. That marks a slight slowdown from growth of 1.19 million bpd expected in 2016.
Oil prices have halved from two years ago in a drop that deepened after OPEC refused in late 2014 to cut output to support prices, hoping that cheaper oil would curb higher-cost rival supply such as U.S. shale.
Despite Brexit, OPEC's 2017 market outlook suggests the strategy is working as it expects supply outside the group to fall further and demand for its own crude to rise, tipping the global market into a slight deficit.
"The contraction seen this year in non-OPEC supply is expected to continue in 2017 but at a slower pace," OPEC said. "Market conditions will help remove overall excess oil stocks in 2017."
Source: Arabian Business