OPEC cuts 2020 oil forecast, urges effort to avert new glut

OPEC’s Secretary-General Mohammed Sanusi Barkindo. The group has cut its forecast for global oil demand in 2020, and has warned of a new glut on the horizon. (AFP)
Updated 12 September 2019

OPEC cuts 2020 oil forecast, urges effort to avert new glut

  • Saudi Arabia pumps less than quota as OPEC+ producers seek to keep market in balance

LONDON: OPEC on Wednesday cut its forecast for growth in world oil demand in 2020 due to an economic slowdown, an outlook the producer group said highlighted the need for ongoing efforts to prevent a new glut of crude.

In a monthly report, the Organization of the Petroleum Exporting Countries said oil demand worldwide would expand by 1.08 million barrels per day (bpd), 60,000 bpd less than previously estimated.

The weaker outlook amid a US-China trade war and Brexit could press the case for OPEC to maintain or adjust their policy of cutting output.

The report lowered OPEC’s forecast for world economic growth in 2020 to 3.1 percent from 3.2 percent and said next year’s increase in oil demand would be outpaced by “strong growth” in supply from rival producers such as the US.

“This highlights the shared responsibility of all producing countries to support oil market stability to avoid unwanted volatility and a potential relapse into market imbalance,” the report said.

OPEC, Russia and other producers, in an alliance called OPEC+, have since Jan. 1 implemented a deal to cut output by 1.2 million bpd. Despite the OPEC-led cut, oil has tumbled from April’s 2019 peak above $75, pressured by trade concerns and an economic slowdown.

The report said oil inventories in industrialized economies fell in July, a development that could ease OPEC concern over a possible glut.

Even so, stocks in July exceeded the five-year average by 36 million barrels.

OPEC and its partners have been limiting supply since 2017, helping to clear a glut that built up in 2014-2016 when producers pumped at will, and revive prices.

The policy has given a sustained boost to US shale and other rival supply, and the report suggests the world will need less OPEC crude next year.

Demand for OPEC crude will average 29.40 million bpd in 2020, OPEC said, down 1.2 million bpd from this year.

OPEC said its oil output in August rose, however, by 136,000 bpd to 29.74 million bpd according to figures the group collects from secondary sources. It was the first increase this year. Saudi Arabia, Iraq and Nigeria boosted supply.

Top exporter Saudi Arabia told OPEC that the Kingdom raised August output by just over 200,000 bpd to 9.789 million bpd. Saudi Arabia continues to pump far less than its quota of 10.311 bpd.

Thanks in part to Saudi restraint, producers are still over-complying with the supply-cutting deal. Losses in Iran and Venezuela, two OPEC members facing US sanctions, have widened the supply reduction. August’s increase, however, puts OPEC output further above the 2020 demand forecast.

The report suggests there will be a 2020 supply surplus of 340,000 bpd if OPEC keeps pumping at August’s rate and other things remain equal, more than the surplus forecast in last month’s report.


UAE regulator not optimistic on Boeing 737 MAX return this year

Updated 43 min 9 sec ago

UAE regulator not optimistic on Boeing 737 MAX return this year

  • The 737 MAX has been grounded since March while Boeing updates flight control software
  • UAE airline flydubai is one of the largest MAX customers

DUBAI: The head of the United Arab Emirates’ General Civil Aviation Authority said on Sunday he was not optimistic that the Boeing 737 MAX would return to operations this year and that the first quarter of 2020 was more likely.
The 737 MAX has been grounded since March while Boeing updates flight control software at the center of two fatal crashes in Indonesia and Ethiopia that together killed 346 people within a span of five months.
Boeing is targeting regulatory approval for the fixes in October, though the US Federal Aviation Administration has said it does not have a firm time for the aircraft to be flying again.
The GCAA will conduct its own assessment to allow the MAX to return to UAE airspace, rather than follow the FAA, Director General Said Mohammed Al-Suwaidi told reporters in Dubai.
He said the GCAA would look at the FAA decision and that the UAE regulator had so far not seen details of Boeing’s fixes.
The FAA has traditionally taken the lead on certifying Boeing jets, though other regulators have indicated they would conduct their own analysis.
UAE airline flydubai is one of the largest MAX customers, having ordered 250 of the fast-selling narrow-body jets.
It has not said when it expects the aircraft to be operational again. American Airlines has canceled flights through Dec. 3, United Airlines until Dec. 19 and Southwest Airlines Co. into early January.