LONDON--The collapse in oil prices is expected to slash growth
in non-OPEC oil production this year, bolstering demand for the
producer group's own output, the International Energy Agency said
Friday, indicating the Organization of the Petroleum Exporting
Countries' strategy to defend its market share may be working.
The decision taken by the oil cartel in November to abandon its
traditional role of stabilizing the market and maintain its output
in the face of falling prices has proved divisive even within the
group. Oil prices, already under pressure from surging U.S.
production and sluggish demand, tanked following the group's
decision and are now down more than 50% since June.
Oil prices ticked higher Friday, following steep losses this
week. On the New York Mercantile Exchange, light, sweet crude
futures for delivery in February traded at $46.86 a barrel, up
1.4%. March Brent crude on London's ICE Futures exchange rose 1.2%
to $48.84 a barrel.
The sharp drop in oil prices is also hitting non-OPEC producers.
Companies are slashing capital expenditure and the number of rigs
drilling and drilling permits in the U.S. has already decreased,
suggesting that supply pressure could ease in the coming
months.
"A price recovery--barring any major disruption--may not be
imminent, but signs are mounting that the tide will turn," the IEA
said in its closely watched monthly oil market report, as it
slashed its forecast for the increase in non-OPEC oil supply this
year by 350,000 barrels a day. The knock-on effect of that is an
expected increase of 300,000 barrels a day in demand for OPEC's oil
this year to 29.2 million barrels a day.
Still, oil production from the U.S. is expected to remain robust
this year, with supply growth slipping by just 80,000 barrels a
day, according to the IEA. Oil output from Canada and Colombia is
expected to weaken slightly more, adding to the easing in supply
growth.
Meanwhile, OPEC's oil output continues to exceed demand
projections and the group's own output ceiling of 30 million
barrels a day. According to the IEA, OPEC production rose by 80,000
barrels a day in December to 30.48 million barrels a day, marking
its eighth straight month above the group's official output
target.
--Georgi Kantchev contributed to this article.
Write to Sarah Kent at sarah.kent@wsj.com
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