The Organisation of Petroleum Exporting Countries (OPEC) yesterday forecast lower demand for its crude next year as rivals pump more. It said top oil exporter Saudi Arabia, is also eager to avoid a return of oversupply and had cut production.
In its monthly report, OPEC said the world will need 32.05 million barrels per day (bpd) of crude from its 15 members this year, down 130,000 bpd from last month’s forecast.
The drop in demand for OPEC crude means there will be less strain on other producers in making up for supply losses in Venezuela and Libya, and potentially in Iran as renewed United States (U.S.) sanctions kick in.
Crude edged lower after the OPEC report was released, trading below $73 a barrel. Prices have slipped since topping $80 this year for the first time since 2014 on expectations of more supply after OPEC agreed to relax a supply-cutting deal and economic worries.
OPEC in the report said concern about global trade tensions had weighed on crude prices in July, although it expected support for the market from refined products.
“Healthy global economic developments and increased industrial activity should support the demand for distillate fuels in the coming months, leading to a further drawdown in diesel inventories,” it said.
OPEC and a group of non-OPEC countries agreed on June 22-23 to return to 100 per cent compliance with oil output cuts that began in January 2017, after months of underproduction by Venezuela and others pushed adherence above 160 percent.
In the report, OPEC said its oil output in July rose to 32.32 million bpd. Although higher than the 2019 demand forecast, this is up a mere 41,000 bpd from June as the Saudi cut offset increases elsewhere.
In June, Saudi Arabia had pumped more as it heeded calls from the U.S. and other consumers to make up for shortfalls elsewhere and cool prices, and sources had said July output would be even higher.
But the kingdom said last month it did not want an oversupplied market and it would not try to push oil into the market beyond customers’ needs.
Rapid oil demand that helped OPEC balance the market is expected to moderate next year. OPEC expects world oil demand to grow by 1.43 million bpd, 20,000 bpd less than forecast last month, and a slowdown from 1.64 million bpd in 2018.