OPEC stays upbeat on 2015 oil demand

OPEC stuck Wednesday to its forecast that oil demand will pick up this year but warned that over-supply may still keep a “ceiling” on oil prices.

The Organization of the Petroleum Exporting Countries stuck to its prediction of total oil demand in 2015 of 92.5 million barrels per day, up 1.18 mbpd from 2014.

Consumption is expected to pick up pace in the second half in line with a global economic rebound, the 12-country cartel said in its June monthly report.

OPEC said that the oil price rose above $60 in May, a high for the year, on the back of higher demand and other factors including “geopolitical turmoil”.

However, it said that “overall fundamentals still point to a well-supplied market that continues to put a ceiling on prices.”

Oil prices collapsed 60 percent between last June and January when it hit a low of $45. This was due in part to a supply glut caused by the boom in US shale oil.

But OPEC, which has traditionally defended price levels by cutting output if needed, dramatically switched strategy last November when it opted to leave production unchanged.

At its bi-annual production meeting last week in Vienna, OPEC stuck to this strategy, keeping its output target unchanged at 30 million barrels per day.

This is seen as an attempt to maintain market share and put pressure on US shale oil producers, which need a higher oil price to be profitable than in traditional extraction methods — a strategy that experts say has had some success.

In Wednesday’s monthly report, OPEC said that sustained lower oil prices “could create serious complications for oil companies, especially companies that depend on fracking and other advanced methods of production.”

“If oil prices remain low for too long, the industry will likely go through a period of consolidation,” it said.