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11/2/2015  Oil Guru Who Called 2014 Rout Sees OPEC Production on Hold


OPEC will probably hold production steady at its meeting next month as the gap between supply and demand for oil closes, according to the analyst who correctly predicted last year's rout in prices.

"I don't think they have to do anything," Gary Ross, founder and chairman of PIRA Energy Group, said in an interview in Singapore on Monday, referring to OPEC.  Global consumption of crude will continue to grow while output from non-OPEC countries will decline next year, helping to bring the market toward equilibrium, he said.

Oil tumbled more than 48 percent last year as US stockpiles and production expanded, creating a global oversuply that the International Energy Agency estimates will persist until at least the middle of 2016.  OPEC's stragegy to defund market share has exacerbated the glut as the group, which kept its production target unchanged at 30 million barrels a day at the last meeting in June, exceeded the quota for hte past 17 months.

"There has to be a tightening of balacnes," said Ross, who last year turned bearish on oil before prices shrank by almost half.  While OPEC volumens have increased, both demand and production from outside the group have responded to low prices, he said.

Brend crude for December delivery was unchanged at $49.56 a barrel on the London based ICE Futers Europe exchnage at 12:50 PM Singapore time.  Prices have decreased 14 percent this year.

PIRA forecasts demand for crude to grow 1.7 million barrels a day in 2016, compaired with 1.9 million a day this year.  Output outside OPEC is expected to decline next year by "several hundred thousand barrels a day," Ross said.  Among the 12 members of OPEC, production is predicted to increase only in Iran and Iraq.

"Total non-OPEC crude and condensate production is forecast to fall below las year's levels," said Ross, predicting that Brent may rise to $70 by the end of 2016.  "Supply growth is limited to OPEC, which grows just 500,000 to 600,000 barrels a day."  On average, Iran's output will rise 300,000 barrels a day and Iraq's will increase 240,000 barrels a day, compared with a year earlier, he estimated.

OPEC, which supplies about 40 percent of the world's oil, is scheduled to gather in Vienna on December 4th, when Iran will officially notify the group of its plans to boost production by 500,000 barrels a day as soon as international sanctions against the Persian Gulf state are lifted, Oil Minister Bijan Namdar Zanganeh said in an interview with Mehr news agency.