OPEC cuts supply to 14-month low as economy threatens demand

Fiscal Challenges

“Fiscal uncertainties persist,” OPEC’s Vienna-based secretariat said in the report. “The U.S. is not the only country faced with fiscal challenges” as the impact of stimulus in Japan is unclear and “there remains some uncertainty about the near-term future development” in Europe.

OPEC boosted estimates for supplies from outside the group by about the same amount as it lowered projections for demand for its own crude.

Non-OPEC producers such as the U.S., Canada and Brazil will bolster output by 900,000 barrels a day to 53.9 million this year, according to the report. That’s about 85,000 a day more than OPEC estimated last month.

Global oil demand will increase by 760,000 barrels a day, or 0.9 percent, this year to 89.6 million barrels, OPEC said.

“OPEC are holding the same unduly pessimistic view on oil demand prospects as in their previous report, citing strong growth in non-OPEC supply in the U.S. in particular,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “These arguments are there to support cuts in the cartel’s production.”

OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The organization is next scheduled to meet in May.

The International Energy Agency, an adviser to consuming nations based in Paris, will publish its next monthly forecasts of supply and demand on Jan. 18.

Bloomberg News

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