OPEC crude oil production in August fell from its record July levels, with the producer group reporting Monday that secondary sources had pegged its output for the month at 33.24 million b/d.
Meanwhile, non-OPEC production will be far more robust in both 2016 and 2017 than had been expected, OPEC said in its closely watched monthly oil market report, due to increases in output from Kazakhstan, Norway, the UK and Canada.
For 2016, non-OPEC supply has been revised upward by 190,000 b/d from the organization's August forecast to 56.32 million b/d, and 2017 supply revised upward by 540,000 b/d to 56.52 million b/d.
The projection indicates that the market's lingering oversupply is likely to extend into next year, as OPEC said it expects the call on its crude for 2016 to average 31.7 million b/d, more than 1.5 million b/d below what it produced in August.
For 2017, if OPEC crude output remains at August levels, that gap would remain about 740,000 b/d, as the producer group expects the call on its crude next year at 32.5 million b/d.
The organization slightly revised upward its expectations of world oil demand for 2016, which it pegged at 94.27 million b/d. In 2017, world oil demand will grow a further 1.15 million b/d to hit a new record of 95.42 million b/d, OPEC said in its report.
Still, OPEC sounded an optimistic tone about supply and demand balances, as it said it expects growing demand to draw down global inventories.
"Despite moderate global economic growth, recent data shows better-than-expected oil demand in some of the main consuming countries," OPEC said. "This, along with a potentially improving oil supply picture, would contribute to a reduction in the imbalance of market fundamentals in the coming months."
FREEZE DISCUSSIONS
In the immediate term, the OPEC production figure is likely to remain in key focus as ministers from the group are scheduled to meet on the sidelines of the International Energy Forum in Algiers from September 26-28, as speculation continues to swirl that an output freeze or individual country production caps could be negotiated.
Russian energy minister Alexander Novak, who has said his country would be willing to join an output deal, has said that a freeze at July, August or September levels is being considered. Novak is scheduled to meet with OPEC ministers at the IEF summit.
Saudi Arabia, OPEC's largest producer, pumped 10.605 million b/d in August, according to secondary sources, up 28,000 b/d from July. However, the kingdom reported to OPEC that its August output was 10.63 million b/d, a 42,700 b/d decline from its July output of 10.673 million b/d.
Iran, meanwhile, saw its production rise to 3.653 million b/d in August from 3.631 million b/d in July, according to secondary sources. The country reported to OPEC that its August output was 3.630 million b/d, a slight 10,000 b/d rise from 3.620 million b/d in July.
The prospect of any output agreement likely will come down to the willingness of geopolitical rivals Saudi Arabia and Iran to take part.
Iran has long insisted that it be allowed to regain its pre-sanctions output levels before it signs on to any deal, but analysts have said that the Islamic Republic's production appears to plateauing, with significant investment needed if it is to maintain production long-term at its year-end goal of 4 million b/d.
Some countries have said they would be willing to grant Iran an exception in any freeze agreement.
Saudi Arabia has not been one of them, with energy minister Khalid al-Falih having consistently said in recent weeks that he saw no need for a freeze at the moment.
But the kingdom's self-reported output decline has some market watchers speculating that it could be more amenable to freezing its production at current levels, now that the summer peak air conditioning season is ending, which would leave room for it to expand exports to any potential customers.
Still, most analysts have said that any freeze agreement at OPEC's current production levels, which first surpassed 33 million b/d in June, would do little to affect current market fundamentals.
"We are skeptical an agreement will be reached, although a compromise is possible," analysts with Societe General said in a note Monday. "However, a freeze would only boost sentiment and would not impact real supply."
