LONDON (Reuters) - OPEC forecast on Monday that demand for its oil this year would be much higher than previously thought, as its strategy of letting prices fall to hurt other producers begins to take effect.
In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) forecast demand for its oil would average 29.21 million barrels per day (bpd) in 2015, up 430,000 bpd from its previous prediction.
That would raise demand for the group’s crude to above the level seen last year, with OPEC’s forecast for production growth outside the group slashed by a third due to a slowdown in the U.S. shale boom and lower oil investments globally.
“(Lower non-OPEC supply is) mainly due to announced capital expenditures cuts for 2015 on the part of international oil companies, as well as a decline in the number of active drilling rigs in the U.S. and Canada,” it said.
It said non-OPEC supply would rise by only 850,000 bpd this year, down 420,000 bpd from last month’s forecast.
OPEC kept output steady at its last meeting in November despite sinking prices, seeking to slow expensive production in the United States and elsewhere that had been boosted by prices averaging near $110 a barrel from 2011 to 2013.
While many of OPEC’s 12 member countries have suffered from the price drop, with Brent crude LCOc1 hitting a post-2009 low of $45.19 a barrel on Jan. 13, high-cost projects globally have also come under pressure.
That was reflected in the biggest reduction to OPEC’s supply forecast, with U.S. output revised lower by 170,000 bpd from last month amid a drop in the number of drilling rigs.
OPEC also lowered its forecast for output in Russia by 70,000 bpd from last month and by a similar amount for Middle Eastern countries outside the group.
Demand is seen growing by 1.17 million bpd next year to 92.32 million bpd, up marginally from last month’s forecast, as lower prices boost consumption.
The Vienna-headquartered group said the forecasts of lower supply were still reliant, however, on prices staying low enough in the first half of this year to slow output.
Brent prices have rallied by almost 30 percent since mid-January, and were above $58 a barrel on Monday, even as many traders still saw the market as well supplied.
Citing secondary sources, the group said it pumped 30.15 million bpd in January, down 53,000 bpd on December.
Additional reporting by Himanshu Ojha and Ron Bousso; Editing by William Hardy and Dale Hudson