OPEC on Thursday sharply raised its forecast for oil supply from non-member countries in 2017 as higher prices encourage U.S. shale drillers to pump more, hampering OPEC efforts to clear a glut and support prices by cutting its output.
In a monthly report, the Organization of the Petroleum Exporting Countries revised up its estimate of oil supply growth from producers outside the group this year to 950,000 barrels per day (bpd), up from a previous forecast of 580,000 bpd.
OPEC is curbing its output by about 1.2 million barrels per day (bpd) from Jan. 1 for six months, the first reduction in eight years, to clear excess supply. Russia and 10 other non-OPEC producers agreed to cut half as much.
The report will add to a debate about the effectiveness of the supply cut pact, which is expected to be extended when producers meet later this month. While oil prices have gained support, higher rival supply is limiting further gains and an inventory glut has proved slow to shift.
“U.S. oil and gas companies have already stepped up activities in 2017,” OPEC said in the report. “U.S. tight crude output is expected to rise rapidly and increase by 600,000 bpd in 2017,” OPEC said, using anther term for shale.
Oil prices pared gains on Thursday after the report was released to trade below $51 a barrel, below the $60 level that top OPEC producer Saudi Arabia would like to see. Prices are still up from about $48 a year ago.