OPEC’s share of the global oil market is set to fall by 2020, according to the cartel’s annual report for 2015. Demand for OPEC’s crude oil is expected to dip to 30.7 million barrels per day (bpd) by 2020, compared with 30.9 million bpd in 2016.
"The impact of the recent oil price decline on demand is most visible in the short term," Abdullah al-Badri, secretary general of OPEC said in the reports opening remarks. "It then drops away over the medium term."
The projected slump in demand for OPEC crude will raise questions over the cartel’s refusal to cut production levels earlier this year in order to defend its market share. OPEC is now facing acrimony within its ranks, as it wrestles with the decision of whether to cut production levels in the short term to arrest the fall in oil prices.
Brent Crude plunged to around $37 per barrel yesterday, as prices continue to slide.
OPEC’s official line is that it will continue to pump at its current levels and defend its market share. However, higher cost producers within the group, namely Venezuela and Nigeria, have called for a cut in production levels in recent months.
The report highlighted the shale oil as a key factor in the reduction in demand for OPEC crude and in particular the resilience of some US producers.
"The most prolific zones within some plays can break even at levels below the prices observed in 2015, and are thus likely to see continued production growth," the report said.
Global shale oil output is expected to reach 5.19 million bpd by 2020, significantly diluting demand for OPEC’s oil. As well as a contraction in OPEC production levels, the report also predicts that the price of Brent Crude will have recovered to $80 per barrel by 2020.