OPEC Boosts Oil Demand Estimates, Admits Oil Prices Can't Rise Above $55

Separately, according to secondary source data, OPEC output in September rose +88.5k b/d to 32.748m b/d; the increase was mostly driven by higher output from Libya +54k b/d, Nigeria +51k, who are exempt from cuts, as well as gains in Iraq production. Saudi Arabian output was unchanged at 9.975m b/d, lowest since May, although based on self-reported data, Saudi production rose by 21.7k b/d to 9.973m b/d.

Additionally, OPEC raised its 2018 oil-demand projections by ~100k b/d to 98.2m b/d, while estimates for non- OPEC supply were cut by 100k b/d this year, -200k b/d in 2018; weaker outlook for next year on lower forecasts for Russia. In summary, OPEC sees that oil market remaining supported in coming months on expectations that supplies of middle distillates like heating oil "will remain relatively tight this winter."

Perhaps the most interesting tidbit in the report, however, was OPEC's admission (on page 45) that there is little upside to prices from here as a result of oil producers ramping up above $50, to wit:

Non-OPEC production is expected to increase next year, primarily as a result of projects that were approved before the 2014 price collapse. When the WTI price remained below $50/b for a longer period, US production growth slowed as the oil rig count declined. Lower prices are beginning to weigh on US shale oil activity as concerns mount that aggressive development could lead to output declines. Oil prices are expected to remain at $50-55/b in the next year. A rise above that level would encourage US oil producers to expand their drilling activities, otherwise the lower prices could lead to a reduction in their Capex.

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