The Organization of the Petroleum Exporting Countries issued a report on Thursday that downgraded demand for its crude for 2015, while also predicting slower oil-production growth in the United States.
The report, which was prepared by the cartel’s economists at its headquarters in Vienna, said that average demand for OPEC crude would be 28.8 million barrels a day this year, 100,000 barrels a day less than it forecast in its previous monthly market report, in December.
The report also said that demand for OPEC’s crude would average less than 28 million barrels a day in the first half of this year.
OPEC, a group of 12 oil-producing nations with Saudi Arabia as the linchpin, showed no sign of cutting production from the average of about 30 million barrels a day in 2014. Its forecasts imply an oversupply of more than 2 million barrels a day in the first half of this year.
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Brent crude, the international benchmark, closed down more than 2 percent on Thursday, at $47.67, after a drop of $1.02, and the U.S. West Texas Intermediate benchmark dropped more than 4 percent, to $46.25, after a drop of $2.24. Oil prices have plummeted roughly 60 percent since June.
Worries about a glut of oil in the first half of this year are a crucial factor depressing oil prices. The International Energy Agency, based in Paris, whose forecasts are closely followed by market participants, also foresees demand for OPEC crude in the first half’s being substantially below the organization’s current production, but by less than OPEC’s forecasts.
The impact of lower prices is rippling through the oil industry. BP said on Thursday that it had informed its North Sea staff that it would be cutting about 200 employees and 100 contractors. Royal Dutch Shell on Wednesday said it would be scrapping plans for an estimated $6.5 billion petrochemical project in Qatar that was a joint venture with Qatar Petroleum.
Seth Kleinman, an analyst at Citigroup in London, said that the current oil industry could not function with prices in the range of $50 a barrel.
“People know these prices are unsustainable,” he said, and they will lead to large-scale layoffs and cuts in maintenance spending, which will eventually sharply reduce overall output. BP’s announcement of layoffs was just the start, he said.
He added that the prospect of “colossally huge inventory buildups” in the coming months would still most likely halt rallies in prices for the time being.
In its report, OPEC also said that the slump in prices since June was beginning to have an effect on production in the United States, where the shale oil industry has been the main source of the new supplies, which have put pressure on prices.
The group said that it expected lower prices, reduced drilling and other factors to trim oil production growth in the United States by almost half compared with 2014, to about 950,000 barrels a day compared with an increase of about 1.6 million barrels a day in 2014. The U.S. Energy Information Administration, a government organization, also said recently that output growth would slow in 2015.
OPEC leaders like Saudi oil minister Ali al-Naimi have said that production cuts should come from higher-cost producers like shale oil companies in the United States rather than from OPEC members, whose production costs are often low. Al-Naimi said recently that Saudi Arabia’s output costs were no higher than $10 a barrel.
By contrast, operating costs in the British North Sea average about $25 a barrel, with some fields much higher.
Richard Mallinson, an analyst at Energy Aspects, a market research firm based in London, said that the OPEC and Energy Information Administration reports were likely to be the first in a series of incremental downgrades of output forecasts for the U.S. if low prices persisted.
Analysts at BNP Paribas in London suggested in a research note published Thursday that U.S. shale companies may not be OPEC’s primary target. The shale industry will be hard to shut down, they wrote, because “any modest price increase is likely to attract back capital to the sector.”
Instead, OPEC may be hoping to discourage investment in new deepwater projects in places like Brazil, Gabon and East Africa “that have high upfront capital costs and long lead times before the first barrel of oil is produced,” they wrote. Canadian oil sands projects and Mexico’s effort to bring in outside companies might also be hurt, they said.