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.


Oil retreats in face of renewed coronavirus uncertainty

Updated 22 February 2020

Oil retreats in face of renewed coronavirus uncertainty

  • G20 finance leaders to meet in Saudi Arabia at the weekend to discuss risks to the global economy
  • OPEC+ has been withholding supply to support prices and many analysts expect an extension or deepening of the curbs

LONDON: Oil prices fell on Friday as weak Asian data and a rise in new coronavirus cases fuelled uncertainty about the economic outlook while leading crude producers appeared to be in no rush to curb output.

Brent crude was down $1.56, or 2.6 percent, at $57.75 in afternoon trade, while U.S. crude dropped $1.25, or 2.3 percent, to $52.63.

"With Brent failing to breach the $60 level on Thursday despite better than expected U.S. oil inventory data, rising market uncertainty is dragging down oil prices on Friday," said UBS analyst Giovanni Staunovo.

"Market participants who benefited from the price rise in recent days might prefer not to go into the weekend with a long position."

 

China reports rise in coronavirus cases.

Japan factory activity shrinks at fastest pace since 2012.

Russia says early OPEC+ meeting no longer makes sense.

Finance leaders from the Group of 20 major economies meet in Saudi Arabia at the weekend to discuss risks to the global economy after new Asian economic and health data kept investors on guard.

Beijing reported an uptick in coronavirus cases on Friday and South Korea reported 100 new cases, doubling its infections. In Japan, meanwhile, more than 80 people have tested positive for the virus.

Factory activity in Japan registered its steepest contraction in seven years in February, hurt by fallout from the outbreak. 

"We still believe that the market is likely to trade lower from current levels, given the scale of the surplus over the first half of this year, and the need for the market to send a signal to OPEC+ that they must take further action at their meeting in early March," said ING analyst Warren Patterson.

Russian Energy Minister Alexander Novak said on Thursday that global oil producers understood it would no longer make sense for the Organization of the Petroleum Exporting Countries and its allies to meet before the planned gathering.

The group, known as OPEC+, has been withholding supply to support prices and many analysts expect an extension or deepening of the curbs.