OPEC expects that world demand for its crude oil will decline next year as rivals, including the U.S., pump more, a downgraded view that comes even as the cartel and its allies have extended a strategy to restrain supplies.
The Organization of Petroleum Exporting Countries says demand for its crude is expected to average 29.3 million barrels per day in 2020, down by around 1.3 mb/d from 2019.
OPEC has cut its 2019 oil-production growth forecast for its peers, including Russia, now expecting a smaller rise of 2.05 million barrels a day. Non-OPEC oil supply is forecast to grow by 2.4 mb/d in 2020, higher than in the current year. This is mainly due to the “debottlenecking” of oil infrastructure in North America and new project ramp ups in Brazil, Norway and Australia.
The cartel’s updated monthly report published Thursday came just a week after the OPEC-plus group extended its reduced output pact for another nine months, a move it had largely telegraphed to the energy market in advance. Crude oil futures prices CLQ19, +0.38% BRNU19, +0.43% slipped in response. The decision came amid rising production from the U.S. — at least before a pullback in stockpiles in recent weeks — and signs of global economic slowing that could sap oil demand.
Oil futures rallied Wednesday to settle at their highest since May, with U.S. prices up a fifth straight session for the longest streak of gains since February. Prices got a boost from data showing a fourth consecutive weekly decline in U.S. crude inventories, dovish comments from Federal Reserve Chairman Jerome Powell that pressured the U.S. dollar, and a storm in the Gulf of Mexico raised expectations for short-term disruptions to oil and natural-gas production in the region.
With the OPEC report’s details, influential Saudi Arabia added to rising inventories with an output increase of 112,000 barrels in June. Nigeria reported a notable output increase of 307,000 barrels last month.
OPEC, as well as the International Energy Agency and the U.S. Energy Information Administration, all lowered their view for 2019 oil demand in May and have remained cautious.
“Although large uncertainties remain, current growth forecasts assume no further downside risks, and, in particular, that trade-related issues do not escalate further,” the report said.
“Brexit poses an additional risk, as does a continuation in the current slowdown in manufacturing activity,” the group said.
That said, “the downward revisions [to supply growth] are mainly due to the extension of the voluntary production adjustments by participating oil producing countries of the Declaration of Cooperation,” the organization said in its report.
Non-OPEC countries Norway and Brazil also contributed to the forecast cut. Brazil was also the only major global economy to have its economic growth forecast downgraded by OPEC’s Secretariat, the report shows.
The International Energy Agency is due to release its own monthly report Friday, which comes as traders assess Gulf of Mexico storms and the near-term impact on production as well as persistent tension between Iran and Western nations.