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

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Thu, 2019-09-12 01:49

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.

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Source: FS – All-News-Economy
OPEC cuts 2020 oil forecast, urges effort to avert new glut