LONDON (Reuters) - The oil market is rebalancing but OPEC cannot “afford to letup” on its production cuts in the face of rising non-OPEC supplies next year, trading house Gunvor’s CEO Torbjorn Tornqvist told Reuters.
“OPEC in our view cannot afford to let up, because more oil is coming and the question is, ‘is the demand increase big enough to absorb that?’” Tornqvist told the Reuters Global Commodities Summit taking place this week.
He said that 2017 is different compared to 2016 in terms of market rebalancing with oil product stocks falling and crude in floating storage clearing up with the current market structure.
“We don’t see this market being out of balance one way or another,” he said.
But he said that overall crude oil stocks “are still high”.
OPEC’s secretary general Mohammad Barkindo, who also addressed the Summit this week, said that while oil product stocks have fallen to only around 25 million barrels above the five-year average, crude remained around 145 million barrels in surplus.
Gunvor sees non-OPEC producers the United States, Brazil, Canada and Kazakhstan adding around 1.5 million barrels per day to global production in 2018.
“These four together are quite sizeable and most likely at least at the level of what we could expect demand growth to be,” Tornqvist said.
The Organization of the Petroleum Exporting Countries and other countries led by Russia agreed last year to curb oil production by around 1.8 million barrels per day to eliminate a global surplus in crude and oil products.
The production cut is set to expire at the end of March 2018.
Tornqvist said he expected “OPEC probably will restrain (production) and not over-flood the market again” given their track-record with the cuts so far.
OPEC meets next in Vienna on Nov. 30 to set its policy.
Asked about his Brent oil price projections for the next 12-18 months, Tornqvist said prices could remain “more or less in the upper end of the $50s” if “OPEC keeps some discipline” and demand grows by 1.5 mln bpd.
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Additional reporting by Amanda Cooper, editing by David Evans